Two broker-dealer subsidiaries of Raymond James Financial Inc. were ordered last week to pay $2.1 million in fines and restitution to clients for allegedly “unfair and unreasonable commissions on securities transactions,” according to Finra.
The 27,000 transactions involved mostly low-priced securities and occurred from January 2006 to October 2010, according to the Financial Industry Regulatory Authority Inc. More than 15,500 clients paid nearly $1.7 million in excess commissions, the regulator said in a statement.
SYSTEMS "INADEQUATE'
Raymond James' two main broker-dealer subsidiaries were ordered to pay fines. Raymond James & Associates Inc., whose brokers are employees, was fined $225,000, while independent-contractor broker-dealer Raymond James Financial Services Inc. was fined $200,000.
The two firms' supervisory systems were inadequate, Finra said in its statement.
“The firms established inflated schedules and rates without proper consideration of the factors necessary to determine the fairness of the commissions, including the type of security and the size of the transaction,” Finra said.
“Broker-dealers must ensure that their automated systems set commission charges that are fair to investors,” Brad Bennett, Finra's executive vice president and chief of enforcement, said in a statement.
Raymond James & Associates, which has 1,645 brokers, and Raymond James Financial Services, which has 4,753 affiliated brokers, neither admitted nor denied the charges, according to the separate letters of acceptance, waiver and consent the firms signed this month.
“We are pleased to have resolved this matter with Finra,” Raymond James spokesman Steve Hollister wrote in an e-mail. “The commissions that will be refunded under our agreement with Finra involved primarily low-priced securities that were determined by an automated commission schedule, which we revised on July 1, 2011, upon notification of Finra's findings.”
The affected trades represent less than 0.1% of the total equity trades executed by Raymond James during the period reviewed by Finra, Mr. Hollister wrote.
And the average impact per affected account over the five-year period was about $110, he wrote.
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