Raymond James will pay over $1.9 million to settle FINRA allegations that it failed to properly report written customer complaints to regulators for years.
Regulations require firms like Raymond James to regularly update reps’ Forms U4 and U5, which catalog certain written and oral customer complaints. Notably, one FINRA rule mandates firms promptly report when any rep “is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery.”
According to the FINRA settlement letter filed this week, this information helps populate the public-facing BrokerCheck system, where investors can look up particular reps to check their disciplinary history. 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.
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.”
Additionally, FINRA argued Raymond James didn’t make “timely reporting” of customer complaints to reps’ Forms U4 and U5. From Jan. 2018 through Sept. 2021, they failed to disclose about 450 complaints. Of those, 360 complaints went unreported until 2023, when FINRA discovered the lapse through an examination. According to the settlement, one of these complaints was submitted eight years later.
The hangup reportedly stemmed from manual data entry that generated the quarterly reports to FINRA informing them of written customer complaints. Unfortunately, the system meant that 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).
Raymond James didn’t correctly highlight this fact for personnel (though, according to the settlement, it instituted a new system in Jan. 2023 that fixed the issue), according to FINRA. Raymond James did not respond to a request for comment as of press time.
The settlement letter released Thursday evening also alleged that Raymond James failed to supervise at least 4.7 million mutual fund purchases reps made directly with mutual fund companies on behalf of clients. This resulted in potentially unsuitable trades that left clients holding the bag on about $111,724 in “excessive” sales charges and commissions.