Raymond James Financial Services Inc. has paid a $1.79 million arbitration award to an 87-year-old client after going to state court to appeal the judgment.
Judge Emily Tobolowsky of the 298th Judicial District Court in Dallas last month confirmed the award and denied the broker-dealer's motion to vacate the payment, a move that few broker-dealers attempt to make.
In May, a Finra arbitration panel ordered RJ to pay some $1.7 million, plus interest, to elderly client Hurshel Tyler and the estate of his deceased wife, Mildred. The sum is thought to be the largest award ever against
Raymond James.
The Tylers, both in their late 80s when the case first went to arbitration, had some $3.5 million in bond funds. But they allegedly were encouraged by a former
Raymond James broker, then based in Amarillo, Texas, to put the money into variable annuities and variable life insurance.
The variable life insurance policy was loaded down with $2 million in improper loans — along with continuing tax and interest obligations — that would have made it difficult to return the product to the broker-dealer, according to a transcript from a court hearing in September. “From a supervisory standpoint, the large loans taken out against the policy should have been red-flagged,” the Tylers' attorney, Tracy Pride Stoneman, said in an interview with
InvestmentNews.
In their complaint, the couple had contended that the investments were unsuitable; an arbitration panel from the
Financial Industry Regulatory Authority Inc. decided in their favor.
In appealing the decision, Raymond James claimed that the Tylers should have returned the annuities, which had grown by more than $958,000. Initially, the elderly couple had sought return of their money, but were instead awarded compensatory damages and were not instructed to return the annuities.
The firm had also argued that the $250,000 it was supposed to pay the Tylers in attorneys' fees ought to be vacated because laws in Florida — where Raymond James is based — don't allow for such awards.
But Ms. Stoneman asserted that Raymond James never brought up that argument in the arbitration discussions in March this year, nor did it ever object to her presentation of the case under Texas law.
“Raymond James continues to believe that the award in this matter is a miscarriage of justice. The Tylers made a profit in excess of $800,000 during the period of time that the Tylers maintained accounts with Raymond James and suffered losses when they transferred their accounts to another broker-dealer," said Robert M. Rudnicki, vice president and director of litigation at Raymond James.
"Raymond James believes the panel erroneously held Raymond James responsible for those losses," he said. "Notwithstanding that fact, Raymond James has determined, after reviewing the anticipated time and resources necessary to continue to fight what we still believe to be an erroneous award, to put the matter behind us and move forward.”
