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Raymond James Fined $15M for Charging Fee on Inactive Accounts

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Three Raymond James Financial, Inc. (RJF - Free Report) entities have collectively agreed to pay $15 million for wrongfully charging advisory fees on inactive retail client accounts and for charging extra commissions for brokerage customer investments in unit investment trusts ("UITs").

The Securities and Exchange Commission ("SEC") has charged Raymond James & Associates, Inc. and Raymond James Financial Services Advisors, Inc. for failing to conduct ongoing reviews of the advisory accounts that remained inactive for at least a year.

Because of this irresponsible behavior, it could not be determined whether the fee-based advisory accounts of certain clients were suitable. Moreover, per the SEC’s order, these entities exploited certain advisory clients by applying wrong prices on the UIT positions held by them, thereby making them pay extra fees.

Along with this, the SEC has charged Raymond James & Associates and Raymond James Financial Services, Inc. for giving incorrect recommendations to some of their brokerage customers, asking them to sell their UIT positions before maturity and buy new UITs instead, without considering whether it was suitable for them or not.

As a result of this, customers had to pay extra sales commissions.

C. Dabney O’Riordan, co-chief of the SEC’s Enforcement Division’s Asset Management Unit stated, “Investment advisers and broker-dealers have on-going obligations to their clients and customers. Raymond James’ failures cost their advisory clients and brokerage customers millions that will be repaid as part of this settlement.”

Of the $15 million that the three entities have agreed to pay, $12 million represents the inappropriate client advisory fees and UIT commissions, whereas the remaining $3 million represents a civil penalty.


Many finance companies across the globe have been facing increasing scrutiny for their business practices. Many of these firms have paid billions of dollars as fines and compensation to settle lawsuits and probes.

Recently, Deutsche Bank AG (DB - Free Report) agreed to pay $15 million in penalty to settle allegations that it exploited its market presence by overcharging clients for unsecured bonds issued by Fannie Mae and Freddie Mac between 2009 and 2016.

In June 2019, State Street Corporation (STT - Free Report) agreed to pay $94.3 million for consistently overcharging mutual fund customers and other clients through concealed markups on back-office expenses for around 17 years.

In May, Wells Fargo & Company (WFC - Free Report) said that it might refund fees wrongfully charged to some customers on account of confusion about the types of transactions counted toward the minimum usage of debit cards that would have waived service fees.

Our Take

Raymond James’ inorganic growth initiatives, strong balance sheet and continued loan growth are expected to support revenues in the quarters ahead. However, higher expenses due to rise in compensation costs will likely hurt profitability to an extent.

Shares of Raymond James have gained 16% so far this year, outperforming 12.7% growth recorded by the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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