Raymond James

Raymond James to Pay $17M Fine for Anti-Money Laundering Compliance Failures

Published on: May 26, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is fining Raymond James Financial Inc. https://www.securities-fraud-attorneys.com(RJFS) and Raymond James & Associates (RJA) $17M. The self-regulatory organization is accusing the company of widespread failures related to anti-money laundering compliance.

According to FINRA, from 2006 to 2014 the processes that the firm had in place to stop money laundering failed to line up with its business growth. The SRO said that the company instead depended on “patchwork” systems and procedures to identify suspect activity. Because of this, Raymond James was unable to notice certain “red flags” that arose.

FINRA also said that both firms did not perform the mandated due diligence and risks reviews for foreign institutions. RJFS is accused of not putting into place and maintaining a Customer Identification Program that was adequate.

It was just in 2012 that Raymond James Financial Services was subject to sanctions for its inadequate procedures related to anti-money laundering. The firm said that it would evaluate its AML procedures and programs.

Also sanctioned and fined is former Raymond James Anti-Money Laundering Compliance Officer Linda Busby. She is suspended for three months and must pay a $250K fine. FINRA said that along with the two firms, she did not succeed in setting up AML programs geared toward the two companies, respectively.

By settling, Raymond James Financial Services, Raymond James & Associates, and Busby are not denying or admitting to the FINRA charges.

It is important that financial firms have systems in place to identify suspect transactions that may be signs of money laundering.

Stockbroker Fraud: Ex-JPMorgan Broker Who Gambled Gets Five Years, FINRA Bars Broker Over Elder Financial Fraud, Risky Alternative Investment Sales and Ex-Broker is Indicted by Jury for Allegedly Bilking Clients of $2.8M

Published on: March 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Former JPMorgan Broker Who Stole Over $20M from Richest Clients, Gambled, Goes to Prison
Michael Oppenheim, a former broker with JPMorgan Chase & CO. (JPM), has been sentenced to five years behind bars. Oppenheim pleaded guilty last year to stealing over $20 million from 10 of his richest clients. At one point Oppenheim managed nearly $90 million for 500 clients. He claims he was addicted to sports gambling.

He began betting on NFL games in 1993 and later got involved in online sports betting. After losing hundreds of thousands of dollars, he began stealing from clients to cover his losses. Oppenheim also started options trading in tech stocks to repay these clients and in one day lost $2.7M. He concealed the theft by providing customers with bogus account statements.

Prosecutors contend that Oppenheim persuaded clients to take out up to millions of dollars from their accounts by promising to put their money in low risk municipal bonds that would be kept at the bank. Instead, he used the funds to get cashier’s checks that he deposited into accounts that were his but located outside the bank. Oppenheim purportedly targeted clients he knew wouldn’t be watching their accounts closely. His scam went on for over seven years.

FINRA Bars Broker for Senior Financial Fraud
The Financial Industry Regulatory Authority has barred David Joseph Escarcega from the financial industry. Escarcega is accused of making a dozen unsuitable recommendations involving debentures tied to the life insurance policy secondary market and targeting elderly clients. He must also pay a $52,270 fine, which is how much he kept in commissions.

According to FINRA, Escarcega sold the debt instruments, which were issued by CWG Holdings Inc., from 3/12 to 6/13. The regulator said that the debentures were very risky and only suitable for investors that could afford to lose all of their investments. The 12 customers involved in this matter were not that type of investor. A lot of the investments were placed in IRAs.
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Raymond James Must Pay Investor $795K

Published on: February 24, 2016 | by Shepherd Smith Edwards & Kantas, LLP

In a Financial Industry Regulatory Authority arbitration case, Raymond James Financial Services Inc. (RJF) has been ordered to pay David B. Silipigno $593,540 plus 3 years and 9 months of interest. That’s an award of about $795,000. According to Silipigno’s attorney, the securities arbitration case involved an RIA who may not have not licensed with FINRA but worked out of the Raymond James independent contractor branch office.

The attorney said that such a work configuration may cause problems in that a non-registered adviser could effectively become a defacto employee of a brokerage firm. OnWallStreet.com names the broker involved as Karen Powell, who has been affiliated with Raymond James since 1999.

Silipingo, in his claim, asserted a number of causes of action, including common law fraud, breach of fiduciary duty, beach of contract, suitability, churning, failure to supervise, and violations of Rule 10b-5 of the Securities Exchange Act violation and The Florida Securities Investor Protection Act. Raymond James continues to deny the allegations. The arbitration panel denied the firm’s request to have Powell’s CRD expunged in this matter.
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Wells Fargo, LPL Financial, and Raymond James to Pay Investors of Retirement Accounts and Charities Over $30M for Mutual Fund Overcharges

Published on: July 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority said that LPL Financial, LLC (LPLA), Raymond James & Associates (RJF), Raymond James Financial Services, Wells Fargo Advisors, LLC (WFC), and Wells Fargo Advisors Financial Network, LLC must pay over $30M in restitution plus interest to customers who were impacted when the firms did not waive mutual fund sales charges for certain retirement and charitable accounts. According to the self-regulatory organization, between July 2009 and the end of 2014 the financial firms either improperly overcharged certain investors who had purchased Class A mutual fund shares or sold them Class B or C shares instead. The latter two come with ongoing, high back-end fees.

Mutual funds typically offer different share classes for sale. Each class has its own sales fees and charges. Although Class A shares come with an initial sales charge, they usually have lower annual fees than Class B and C shares. However, mutual funds will usually waive Class A sales charges when selling them to charities and some retirement accounts.

The broker-dealers offered these waivers for the retirement and charitable plan accounts under limited conditions. The waivers also were disclosed in prospectuses. Yet, according to FINRA, at various times since at least July 2009, the firms did not actually waive the sales charges for these customers when they were offered the Class A shares.

Because of this, contends the agency, over 50,000 eligible retirement accounts and charitable organizations either paid sales charges for the Class A shares or bought other share classes that required them to pay higher ongoing fees and other expenses. FINRA said that the firms did not properly supervise the sale of these mutual funds and depended on its brokers to offer the waiver discounts even though they weren’t properly trained.

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award

Published on: April 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Financial Industry Regulatory Authority arbitrators have awarded Mayank Chamadia $3.7 million in compensation in his case against Barclays Plc. (BARC) Chamadia was placed on leave from the June 2013 to prepare testimony for a possible interest-rate manipulation case. He resigned in October 2013 to go work for another firm.

Although Chamadia wasn’t accused of any violations, he said that the leave time while at Barclays hurt not just his reputation but also his bonus earning power. Now, Barclays must pay Chamadia millions of dollars in deferred pay along with the compensation. The arbitrators found that the firm had “no basis” to reduce or keep payouts that had not yet vested. Chamadia’s lawyer says that this releases some $9 million in back pay that had vested, including interest, to his client.

In another financial representative case against a firm, Robert Fenyk, an ex-Raymond James Financial Services Inc. (RJF) adviser, recently saw his $650,000 award reinstated by the U.S. Court of Appeals for the First Circuit. The ruling comes after a five-year legal battle.

FINRA Bars Former Raymond James Advisor for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision

Published on: October 6, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred Jo Ellen Fischer, an Raymond James independent financial advisor, for purportedly stealing nearly $1 million from a 95-year-old client. At the time, Fisher worked for Peoples Bancorp.

According to the self-regulatory organization, from July to December 2013, the Raymond James advisor converted $924,750 from the elderly customer’s trust without permission. She did this by moving funds and securities into a brokerage account under her daughter’s name. Fisher then liquidated securities and used the money to cover her personal spending, including two Rolexes, motor vehicles, a 2-carat diamond ring, and other expenses.

FINRA says that Fisher claimed that the elderly client was her daughter’s godfather and he wanted her to have the money when she was older. The SRO, however, contends that the Raymond James advisor falsified documents regarding this matter. She has agreed to the bar without denying or admitting to the findings alleging elder financial fraud.

Financial Firms In The Spotlight: Raymond James Gives RIA’s Access to Alternative Investments, Citigroup’s $730M Bondholder Settlement is Approved, JPMorgan Deals with China-Related Hirings Inquiry, & Merrill Lynch’s Future as an Entity is Uncertain

Published on: August 23, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Affiliated RIAs of Raymond James to Get Access to Firm’s Alternative Investments

The Raymond James Alternative Investment Group will give its affiliated registered investment advisers access to hedge funds, private real estate, managed futures, private equity, and alternative mutual funds beginning next month. The move is part of Raymond James’ (RJF) attempt to strengthen its RIA platform.

Already, it has added more support services for investment advisers in the areas of marketing, practice marketing, and succession planning. The financial firm also brought in four regional directors for recruiting and existing practices while cutting equity ticket charges and waving certain individual retirement account fees.

Investors are Not Raymond James Financial Customers for FINRA Arbitration Purposes, Rules 4th Circuit

Published on: March 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Court of Appeals for the Fourth Circuit affirmed that, for purposes of Financial Industry Regulatory Authority arbitration, investors who lost the investment they made on stock they purchased from a lawyer connected to a Raymond James Financial Services (RJF) Inc. broker are not the brokerage firm’s client. The appeals court said that the investors dealings with the broker-dealer were “too remote.”

Tax lawyer David Affeldt had been recruited by an Inofin Inc. executive to recommend to investors that they buy securities from the company. That employee happened to be the college roommate of then-Morgan Stanley (MS) representative Kevin Keough, who also informally acted in a sales capacity for Inofin.

Because of his employment with the financial firm at the time, Keough had Inofin pay his compensation for the referrals to his wife instead of to him. He and Affeldt, however, agreed to equally share these referral fees-an agreement that continued even after Keough went to work with Raymond James.

Court Upholds Ex-NBA Star Horace Grant’s $1.46M FINRA Arbitration Award from Morgan Keegan & Co. Over Mortgage-Backed Bond Losses

Published on: October 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Three years after the Financial Industry Regulatory Authority awarded former Chicago Bulls forward Horace Grant a $1.46 million arbitration award in his securities claim against Morgan Keegan & Co., the U.S. Court of Appeals for the Ninth Circuit has upheld that ruling. Grant, who had suffered mortgage-backed bond losses, accused the brokerage firm of not disclosing to him that his investments were not suitable for him, withholding information about the actual risks involved, and failing to supervise the fund manager. Morgan Keegan is now part of Raymond James Financial Inc. (RJF).

Grant bought the majority of the funds through his account with Morgan Keegan in 2004 when the brokerage firm owned the sports agency that represented him. The mortgage-backed bond funds were among a group of investment products that took huge losses in value in 2007 and 2008 when the subprime market failed.

Hundreds of investors proceeded to file similar mortgage-backed bond losses claims against Morgan Keegan, which finally agreed to settle with regulators for $200 million the allegations that it had inflated the value of the high-risk subprime securities that the funds held. James Kelsoe, a fund manager who is accused of purposely inflating the subprime securities’ value, would later to agree to an industry bar by the SEC and consent to pay a $500,000 penalty.

The 11th Circuit Revives SEC Fraud Lawsuit Against Morgan Keegan Over Auction-Rate Securities

Published on: May 8, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The 11th U.S. Circuit Court of Appeals has revived the US Securities and Exchange Commission’s fraud lawsuit against Morgan Keegan & Co. accusing the financial firm of allegedly misleading investors about auction-rate securities. The federal appeals court said that a district judge was in error when he found that alleged misrepresentations made by the financial firm’s brokers were immaterial. The case will now go back to district court. Morgan Keegan is a Raymond James Financial Inc. (RJF) unit.

The SEC had sued Morgan Keegan in 2009. In its complaint, the Commission accused the financial firm of leaving investors with $2.2M of illiquid ARS. The agency said that Morgan Keegan failed to tell clients about the risks involved and that it instead promoted the securities as having “zero risk” or being “fully liquid” or “just like a money market.” The SEC demanded that Morgan Keegan buy back the debt sold to these clients.

In 2011, U.S. District Judge William Duffey ruled on the securities fraud lawsuit and found that Morgan Keegan did adequately disclose the risks involved. He said that even if some brokers did make misrepresentations, the SEC had failed to present any evidence demonstrating that the financial firm had put into place a policy encouraging its brokers-dealers to mislead investors about ARS liquidity. Duffey pointed to Morgan Keegan’s Web site, which disclosed the ARS risks. He said this demonstrated that there was no institutional intent to fool investors. He also noted that a “failure to predict the market” did not constitute securities fraud and that the Commission would need to show examples of alleged broker misconduct before Morgan Keegan could be held liable.