"In 2011, the firm paid more than $2 million in restitution and fines for conduct that was identical to this," the press release states. "It is clear from these actions that there is a continuing need for state regulators to work together to protect the best interests of investors."
Among the requirements of the settlement Raymond James has entered into with state securities regulators is an offer of restitution to clients who were charged more than 5% commissions on equity transactions in the past five years. The broker-dealer must also change its supervisory and a compliance apparatus concerning brokerage commissions.
"We are pleased to resolve this matter regarding commissions charged in a specific population of small principal amount equity trades generated by our automated commission process," Raymond James said in a statement.
"All impacted clients will be reimbursed the excess commission amounts plus interest and we are implementing the necessary adjustments to our equity commission schedule. Our commitment to putting clients' interests first remains our top priority," the added.
Details on Charges, Commissions
According to Galvin's office, Raymond James' clients making equity trades over the past five years were charged commissions based on a tiered schedule — calculated based on the principal amount of the trade.
- The commission schedule ranged from 3% of principal plus $5 for buying and selling stocks between $0 and $4,999.99 to 0.8% of principal plus $355 for equity trades of $50,000 and above.
- Clients were charged a minimum commission of $75 for some equity buy and sell transactions, excluding, for example, equities underwritten by the firm's affiliated investment bank.
- Raymond James had an alternative small transaction commission schedule for the buying and selling of stocks with a principal amount of $300 or less; this schedule included charges of between $0 and $35 per transaction versus the $75 minimum equity commission.
- Despite the small stock transaction schedule, even for positions valued at $300 or less, Raymond James' order entry systems defaulted to the minimum equity commission when applicable.
In addition to the 270,000 transactions executed nationwide that had a commission in excess of 5% of the principal value, totaling over $8.25 million in excess commissions, Raymond James also executed:
- About 33,500 stock purchases and some 98,500 stock sales, which included commissions in excess of 5% of the principal value, via the firm's employee advisor channel, Raymond James & Associates.
- Roughly 41,500 equity buy transactions and some 95,500 equity sell transactions, which included commissions in excess of 5% of the principal value, through the firm's independent advisor channel, Raymond James Financial Services.
- Over 5,700 transactions in Massachusetts that included commissions in excess of 5% of the principal trade amount, totaling over $185,000.
- Numerous equity trades that had commissions that totaled over 90% of the principal value of the transaction.
– Janet Levaux contributed to this report.
