According to FINRA, Raymond James Financial Services, Inc. (RJFS) was censured, fined $800,000, ordered to pay $48,574.79 plus interest in restitution, and required to certify completion of its review of policies, procedures, and systems regarding electronic communications monitoring.
This action was part of a consolidated case involving both RJFS and Raymond James & Associates. RJFS's specific violations included failing to have qualified principals authorize account name or designation changes on equity orders, which enabled a representative to cause customer losses of approximately $100,000 by switching account designations without authorization.
More significantly, RJFS failed to reasonably supervise registered representatives who systematically overcharged institutional customers approximately $2.4 million in commissions. The representatives operated as a team, placing orders and then instructing the trading desk to increase commissions before execution. They concealed this fraud by creating misleading trade confirmations that understated commissions and misstated share prices, which they emailed directly to customers.
The supervisory failures were particularly troubling. RJFS's email surveillance system electronically flagged hundreds of emails containing the fraudulent confirmations for manual review. The communications surveillance team reviewed these flagged emails but failed to examine the attached confirmations. This represented a critical gap in the firm's supervisory process - the system correctly identified potentially problematic communications, but human reviewers failed to complete the investigation.
Additionally, during a branch inspection, RJFS compliance staff identified the representative-created confirmations and escalated the issue, but no one verified the confirmations for accuracy. The scheme only ended when RJFS flagged an unusually large order for review.
For investors working with institutional brokers, this case underscores the importance of independently verifying trade execution details and maintaining records that can be compared against broker confirmations. Most customers were previously compensated, with the ordered restitution covering remaining losses.
