According to FINRA, Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. (RJFS) were sanctioned for multiple supervisory failures, including failing to have qualified principals authorize account name changes on equity orders and failing to supervise representatives who overcharged institutional customers approximately $2.4 million in commissions.
The case reveals two distinct compliance breakdowns. First, both firms failed to have registered principals authorize changes to account names or designations on equity orders. A former RJFS representative exploited this gap by changing account designations between customer accounts and his own personal account without principal review, resulting in approximately $100,000 in customer losses. After self-reporting, the firms hired a third-party consultant for a multi-year backward-looking review, leading to identification and reimbursement of losses.
The second and more egregious violation involved RJFS representatives who engaged in a commission overcharge scheme. These representatives would place institutional customer orders, then contact the trading desk to increase commissions before or during order execution. To conceal their misconduct, they created their own trade confirmations with false information - including understated commissions and misstated share prices - which they emailed to customers.
The scheme involved systematic fraud, yet RJFS's email surveillance system flagged hundreds of emails containing the misleading confirmations as attachments. The communications surveillance team reviewed the flagged emails but failed to examine the attachments - a critical oversight. Had they done so, they would have discovered the misrepresentations. Additionally, during a branch inspection, compliance staff identified the representative-created confirmations but no one verified their accuracy.
For investors, this case demonstrates the importance of carefully reviewing trade confirmations and comparing them to market data. It also highlights why firms need robust, multi-layered supervisory systems. RJFS has since designated principals on trade desks to review account changes and has enhanced its communications surveillance procedures.
