More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
After appealing an arbitration award, Raymond James Financial Services (RJF) recently paid close to $1.8 million to a former client in Texas, according to an attorney representing the investor on Wednesday.
Appeals of arbitration awards are “extremely rare,” said Tracy Pride Stoneman of the Stoneman Law Firm in Denver, who issued a press release and represented the plaintiff, Hurshel Tyler, now 87. The Dallas judge ruling on the case dismissed the appeal and confirmed the arbitration award on Oct. 12, giving Raymond James 30 days to pay it, Stoneman says.
"Raymond James continues to believe that the award in this matter is a miscarriage of justice,” said Robert M. Rudnicki, vice president and director of litigation for Raymond James, in a statement.
According to Rudnicki, the Tylers had gains of more than $800,000 during the period of time they had accounts with Raymond James and “suffered losses when they transferred their accounts to another broker-dealer.”
“Raymond James believes the panel erroneously held Raymond James responsible for those losses,” Rucknicki explained. “Notwithstanding that fact, Raymond James has determined, after reviewing the anticipated time and resources necessary to continue to fight what we still believe to be an erroneous award, to put the matter behind us and move forward."
The focus of the case was Raymond James branch office manager Paul Davis, who led the firm's independent-advisor office in Amarillo, Texas, before leaving the firm in 2006.
When Davis became the Tyler's new stockbroker, Stonehouse says, he recommended that the Tylers liquidate their municipal bond portfolio and purchase variable annuities and life insurance.
“Unbeknownst to the Tylers, Mr. Davis then switched the Tylers from one variable annuity to another variable annuity, costing the Tylers a large surrender fee and another large commission,” the attorney said, noting that Hurshel Tyler was 81 at the time.
“The three-person all-public arbitration panel found that Raymond James made unsuitable investments for the Tylers, failed to supervise, breached its contract with the Tylers and violated FINRA Rules 2310 and 3010, the rules regarding suitability and supervision,” the attorney explained
According to Raymond James, the Tylers’ policies were originally purchased in 2002.
In unrelated news on Wednesday, Raymond James -- which has more than 5,400 financial advisors in the U.S., Canada and Britain -- said it hired a team of five advisors from Morgan Stanley Smith Barney with more than $150 million in assets and about $1.7 million in yearly production, or fees and commissions. The teams joined the employee-channel of Raymond James in Ocala, Fla.
On Tuesday, the broker-dealer said a former Wells Fargo financial advisor -- with about $206 million in client assets and more than $900,000 in yearly production -- joined its St. Louis office.