Raymond James Financial Inc. could face a loss of $25 million to $50 million if it has to buy back distressed auction-rate securities from clients immediately.
The Securities and Exchange Commission, the New York attorney general's office and the Florida Office of Financial Regulation have been investigating the firm, which has had negotiations with the regulators to resolve the matter.
“Were we to repurchase that ARS portfolio, the fair value could be less than the par value of such securities by an amount ranging from $25 million to $50 million,” the company said in a filing with the SEC. “This estimate does not include any ARS held by our clients who transferred to another broker-dealer.”
The company didn't say if a settlement is pending.
At the end of March, Raymond James clients held about $370 million in auction-rate securities, the market for which seized up during the winter of 2008. The distressed market for the securities, which many brokerage firms sold, touting their liquidity, was one of the first major signs of the credit crisis that eventually shook Wall Street and the economy in 2008 and 2009.
Large investment banks that underwrote the frozen securities quickly entered into settlements with regulators to buy back the securities from retail clients. Raymond James sold the product but wasn't an underwriter.
“We believe we have meritorious defenses, and therefore, any action by a regulatory authority to compel us to repurchase the outstanding ARS held by our clients would likely be vigorously contested by us,” the firm said
Raymond James has more than 5,000 registered representatives and financial advisers in employee and independent sales channels.
E-mail Bruce Kelly at firstname.lastname@example.org.