Business: Raymond James is fined $2.75M

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Raymond James is fined $2.75M

By HELEN HUNTLEY
Published February 22, 2007

Raymond James Financial Services of St. Petersburg will pay a $2.75-million fine to the NASD for poor supervision of brokers who manage their own offices.

The company "allowed producing branch managers to supervise themselves," NASD executive vice president James Shorris said Wednesday. "This flawed supervisory system created a situation where the unsuitable sales of variable annuities and risky mutual funds to elderly and risk-averse customers went undetected."

This is the company's third significant fine for supervisory failures in the past two years. The Securities and Exchange Commission fined Raymond James $6.9-million in September 2005 for lax supervision while one of its Rhode Island brokers, Dennis Herula, was running a $16.4-million scam. Earlier in 2005, Raymond James agreed to pay $888,000 in fines and restitution for failure to supervise sales of fee-based products.

About 1,100 Raymond James brokers who work as independent contractors were in the dual roles of selling broker and branch manager from 2000 through 2004, the NASD said. It cited the particularly egregious case of broker Donna Vogt, who ran an office out of her home in Campbellsport, Wis.

The NASD, the private-sector regulator of the securities industry, said Vogt recommended aggressive mutual funds and variable annuities to elderly customers, and Raymond James failed to detect that the investments were unsuitable. In one case, she recommended that an 82-year-old woman put half her net worth in an aggressive mutual fund, where she lost 75 percent of the money.

Raymond James fired Vogt in 2003 and paid $10.2-million to settle 57 claims from her clients. The National Association of Securities Dealers said Wednesday it has permanently banned Vogt from the securities industry.

Raymond James, which did not admit any wrongdoing, said it improved its supervisory procedures by investing "several million dollars" in technology upgrades and by substantially increasing the number of workers in compliance, sales management and supervision.

Raymond James Financial Services, which has 3,100 financial advisers, is a subsidiary of Raymond James Financial Inc.

Helen Huntley can be reached at hhuntley@sptimes.com">href="mailto:hhuntley@sptimes.com" mce_href="mailto:hhuntley@sptimes.com">hhuntley@sptimes.com or 727893-8230.

[Last modified February 22, 2007, 01:51:45]

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by Bob	03/07/07 12:13 PM
We live in a land where "profit" is glorified and "risk" is exciting. Dishonesty is just too tempting for clever tacticians with few scruples. Better for inexperienced people to save conservatively rather than risk unnecessarily and believe a lie.

by Adrian	02/28/07 10:42 AM
Brokers are not fiduciaries and have never been taught the fundamentals of investing. They are salespeople who have to sell whatever their employer chooses. Their job is to move money from their clients' retirement nest eggs into theirs.

by Carol	02/27/07 10:11 PM
How can this happen in the USA, I'm a simple housewife that lived off that money. Someone out there please help us. It was A BIG SCAM, THEFT. If we let something like this go, WHAT NEXT! I love my country and I want to say God bless America!

by Carol	02/27/07 09:50 PM
I froze when I got the news about my investment. It was my husband's life ins. policy. When he died, he said, at least you will have some money to live on. Those were his last words to me and I love you very much.I was told it was secured by the FDIC

by Patrick	02/23/07 06:49 AM
Stop giving RJ a bad name. It is a company that I am proud to work for.

by Jeff	02/22/07 10:39 PM
Sour grapes from former employees. I have a couple friends who have worked in oversight departments at RJ over the past few years and they have said the company is very ethical. This is just a couple bad people making the company look bad. Not so!!

by Sarah	02/22/07 03:19 PM
I worked at the St. Pete RJF home office for 11 months. Agree that lots of unsavory things were going on. This news is not a surprise; more to come, I'm sure.

by steve	02/22/07 03:09 PM
i work for another firm, not Rj its pretty much all about the commissions.

by Daniel	02/22/07 02:39 PM
Sounds like all the negativity is from ex-employees. Interesting. I bank with another broker - but they've been fined for similar reasons. Seems to be part of doing business in such a highly regulated industry.

by Joe	02/22/07 11:52 AM
I worked at the St.Pete home office, and I too witnessed unapproiate sales for annuities and mutual funds and we were told to say nothing, just "push the paperwork" while the reps get $2-10k per sale, while I was barely making ends meet!Shame on RJ!

by Rene	02/22/07 11:34 AM
I worked for a year at RJF in one of the departments responsible for oversight and it was a total joke. Not surprised at this news one bit!

by John	02/22/07 08:20 AM
That's not the only thing RJF is doing wrong: I have a pending EEOC/FEPA complaint against them for firing me for filing hostile workplace complaints, and violation of ADA rights. RJF's lawyer in my matter is completely blind to anything, as is RJF.