The Financial Industry Regulatory Authority announced a settlement with Raymond James Financial Services, Inc. over violations involving the reporting of customer complaints, WealthManagement reports.
In a letter of acceptance, waiver and consent, FINRA said that Raymond James will pay over $1.9 million to settle the case.
FINRA pointed out that member firms must disclose, establish and maintain systems reasonably designed to supervise the disclosure of customer complaints but said that Raymond James failed to reasonably supervise the reporting of customer complaints on regulatory disclosure forms.
Forms U4 and U5 catalog certain written and oral customer complaints and FINRA requires firms to promptly report when any representative is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery.
The authority said that Raymond James “has failed to report any written customer complaints” required under the rule concerning written customer complaints since at least Jan. 2018, “even though the firms have received numerous complaints alleging forgery, theft, or misappropriation of funds or securities.”
It was determined that from Jan. 2018 to Sept. 2021, Raymond James failed to timely report about 450 customer complaints to representatives’ Forms U4 and U5. 360 of them went unreported until 2023, when the matter was discovered by a FINRA examination.
FINRA Rule 4530 requires firms to make quarterly reports to FINRA of written customer complaints. But due to a manual data entry system, the complaint could be excluded from the quarterly reports if personnel didn’t input any particular data (including complaint date, type, problem code or product code).
“Failure to manually enter certain of this data into the system for any given complaint resulted in its exclusion from FINRA Rule 4530(d) reports,” FINRA’s letter states. “Nonetheless, the firms’ procedures failed to highlight that manually logging all data into the system was necessary to meet the firms’ FINRA Rule 4530(d) reporting obligations, and the firms failed to take reasonable steps to ensure that personnel actually entered all such data into the system. In January 2023, the firms implemented a new system that addressed these deficiencies.”
FINRA also found that Raymond James failed to supervise at least 4.7 million mutual fund purchases its representatives made directly with mutual fund companies on behalf of clients, resulting in potentially unsuitable trades that cost clients about $111,724 in “excessive” sales charges and commissions.
Under the terms of the settlement, Raymond James & Associates will pay $525,000 in fines and $26,169.94 in restitution, while Raymond James Financial Services will pay $1.3 million in fines and restitution, totaling $85,554.94. Combined, both firms will pay approximately $1,936,720.
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