The regional brokerage and independent broker/dealer units of Raymond James Financial Inc. have been slapped with a $750,000 fine and ordered to pay $138,000 back to clients as part of a settlement with NASD of charges that firms had violated the self-regulatory organization’s rules for offering fee-based brokerage accounts.
In the wake of the settlement, announced April 27, both units will end the Passport fee-based brokerage account program, which was launched at St. Petersburg, Florida-based Raymond James in 2001 and had grown to some $5.5 billion in assets by August 2004. According to the parent company, both units are now asking holders of 27,000 fee-based brokerage accounts whether they would like to switch back to commission-based accounts or move to fee-based advisory accounts, which are held to stricter fiduciary standards. “The primary service in an advisory account is providing advice, which is squarely what the Raymond James business model is,” said Mark Barracca, associate corporate counsel for Raymond James Financial. He said he expects the switch would be completed by July 1.
In settling with NASD, the Raymond James units neither admitted nor denied the charges. Barracca said that Raymond James disagrees with the NASD’s view that because any advice provided in a fee-based brokerage account is incidental, the primary value of such an account is cheap trading. But fee-based brokerage accounts have been a contentious matter since the Financial Planning Association sued the Securities & Exchange Commission last year in a bid to get the agency to determine whether brokers should be able to offer advice as part of these relationships.