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Raymond James Auction Rate Securities Settlement

According to the Investment News, as part of a settlement with eight states and the Securities and Exchange Commission, Raymond James Financial Inc. will buy back $300 million in auction-rate securities from clients and pay a fine of $1.7 million.

The states in charge of the settlement are Florida and Texas. Other states involved were Indiana, Missouri, New York, North Carolina, Pennsylvania and South Carolina.

Raymond James has 30 days to extend an offer to repurchase the securities, and the offer must be open for 75 days after that initial bid.

Raymond James’ registered representatives and financial advisers told their customers that auction rate securities were “cash equivalents” and “highly liquid” short-term investments that sported a higher yield than money market accounts, according to the consent order for the dispute.

Raymond James has been dealing with the auction rate securities mess since the winter of 2008, when the market froze for billions of dollars of the securities, leaving institutional and retail clients locked into large cash positions. In August 2008, Raymond James said it was subject to investigations by regulators regarding the auction rate securities sold be its registered reps to clients, who owned about $1.3 billion in paper at that time.

Since then, the firm has been unwinding its position, but the issue of buying back auction rate securities has been a thorn in the side of the brokerage for some time. In March 2009, the firm’s chairman and former chief executive, Tom James, said it was possible that Raymond James could sue an issuer of the securities, Pacific Investment Management Co. LLC, if it failed to buy back the securities from clients.

Raymond James, which neither admitted to nor denied the allegations, noted that it was fined by the states, not the SEC.

The $300 million buyback seems a large sum for Raymond James to pay, considering in May the B-D noted that “any action by a regulatory authority to compel us to repurchase the outstanding ARS held by our clients would likely be vigorously contested by us.”

What’s more, rival Morgan Keegan & Co. Inc. yesterday won a major court victory stemming from its sales of auction rate securities. A federal judge in Atlanta on Tuesday rejected SEC claims that the brokerage, a unit of Regions Financial Corp., misled investors about $2.2 billion in auction rate securities.

If you have questions about the Raymond James settlement, the securities attorneys of The White Law Group may be able to help.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.


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