Washington D.C., Sept. 17, 2019 — The Securities and Exchange Commission today instituted a settled order against three Raymond James entities for improperly charging advisory fees on inactive retail client accounts and charging excess commissions for brokerage customer investments in certain unit investment trusts (UITs).
The SEC order finds that Raymond James & Associates, Inc., and Raymond James Financial Services Advisors, Inc., failed to consistently perform promised ongoing reviews of advisory accounts that had no trading activity for at least one year. According to the order, because they did not conduct the reviews properly, they failed to determine whether the client’s fee-based advisory account was suitable. The order further finds that the entities also misapplied the wrong pricing data to certain UIT positions held by advisory clients, causing them to overpay fees.
In addition, the order finds that Raymond James & Associates, Inc., and Raymond James Financial Services, Inc., recommended that their brokerage customers sell UITs before their maturity and buy new UITs without adequately determining whether these recommendations were suitable. According to the order, the recommendations for early sales and purchases resulted in customers incurring (and the Raymond James entities receiving) greater sales commissions than would have been charged had the customers held the UITs to maturity and then purchased new UITs. The order further finds that Raymond James also failed to apply available sales discounts for brokerage customers that rolled over their proceeds after selling a maturing UIT to purchase another one.
“Investment advisers and broker-dealers have on-going obligations to their clients and customers,” said C. Dabney O’Riordan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Raymond James’ failures cost their advisory clients and brokerage customers millions that will be repaid as part of this settlement.”
The order charges Raymond James & Associates, Inc. and Raymond James Financial Services Advisors, Inc., with violating Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7, and charges Raymond James & Associates, Inc., and Raymond James Financial Services, Inc., with violating Sections 17(a)(2) and (3) of the Securities Act of 1933. To settle the charges, the three Raymond James entities agreed to be censured and to disgorge approximately $12 million representing inappropriate client advisory fees and unit investment trust commissions, together with prejudgment interest, and to pay a $3 million civil penalty. The three Raymond James entities have agreed to make distributions to harmed investors.
The SEC’s investigation was conducted by Salvatore Massa in the Asset Management Unit and New York Regional Office. The case is being supervised by Jessica Weissman. The staff received assistance from Mark Fowler of the Office of Compliance, Inspections and Examination from the Philadelphia Regional Office and Andrew Shelton, J. Matthew Jenkins, Deuce Tu, Michael Watson, Lundy Ben, Dmitry Malinskiy, and John LaVoie of OCIE’s Risk Analysis Examination Team.