Six states impose $4.2M fine on Raymond James for excessive fees

The firm was also ordered to return $8.25 million to retail customers.

Six states ordered Raymond James to pay $4.2 million in fines and penalties and return $8.25 million to retail customers who were charged excessive commissions for small-dollar trades.

An investigation by the states — Alabama, California, Illinois, Massachusetts, Montana and Washington — found that Raymond James & Associates Inc. and Raymond James Financial Services Inc. charged unreasonable commissions on more than 270,000 low-principal equity transactions since July 1, 2018, according to an order filed by Massachusetts Secretary of the Commonwealth William Galvin. The firm received $8.25 million in excess commissions from those transactions.

Raymond James collected a minimum $75 commission on trades, contradicting a commission schedule that allowed its registered representatives to charge commissions of between $0 and $35 per transaction, depending on the size of the transaction.

“Despite the small stock transaction schedule, even for positions valued at $300 or less, [Raymond James’] order entry systems defaulted to the minimum equity commission, where applicable,” the order states.

As part of the settlement, Raymond James agreed to return the $8.25 million in excessive commissions plus 6% interest to customers who were overcharged.

Galvin said Raymond James failed to implement controls to prevent unreasonable commission. Many customers paid 90% of the principal amount.

“This isn’t the first time Raymond James has overcharged customers,” Galvin said in a statement. “In 2011, they paid more than $2 million in restitution and fines for conduct that was identical to this. It is clear from these actions that there is a continuing need for state regulators to work together to protect the best interests of investors.”

As part of the settlement, Raymond James neither admitted nor denied the charges. The firm said it is happy to be moving on.

“We are pleased to resolve this matter regarding commissions charged in a specific population of small principal amount equity trades generated by our automated commission process,” Raymond James spokesperson Steve Hollister said in a statement. “All impacted clients will be reimbursed the excess commission amounts plus interest and we are implementing the necessary adjustments to our equity commission schedule. Our commitment to putting clients’ interests first remains our top priority.”

The North American Securities Administrators Association, an organization of state regulators, said the enforcement action against Raymond James demonstrates that states will act quickly to protect investors.

“NASAA has spent a lot of energy and resources on the pocketbook issues that are so important to Main Street investors,” Andrew Hartnett, NASAA president and Iowa’s deputy insurance commissioner, said in a statement. “When people decide to invest their hard-earned money, they should get the maximum value of their investing dollars.”

In addition to the fine and restitution, Raymond James must certify in writing that it has enhanced its policies and procedures to ensure that all commissions are “fair and reasonable,” NASAA said.