Archive for the “Raymond James Financial” Category

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Raymond James Financial to buy back $2.5 million in auction-rate securities (ARS) from investor Greg Merdinger.

According to a July 27 Wall Street Journal article, Merdinger filed a claim in June 2009 against Raymond James & Associates and Raymond James Financial Services on allegations of breach of fiduciary duty and contract. In the addition to the $2.5 million ARS buyback, FINRA awarded Merdinger $86,000, plus 5% interest on the $2.5 million until Raymond James buys back the securities.

FINRA’s ruling stated that Merdinger initially wanted to invest in money-market funds, but changed his mind based on recommendations from Raymond James. Instead, Raymond James advised him to invest in auction-rate securities, which it said were safer. In making the recommendation, Raymond James concealed the risks associated with the products, FINRA said.

When the market for auction-rate securities collapsed in February 2008, Raymond James continued to advise Merdinger to buy auction-rate securities. As reported in the Wall Street Journal article, copies of emails showed that financial managers at Raymond James realized there were problems in the auction-rate market long before its ultimate collapse.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

Institutional and individual investors failed to emerge victorious in two recent auction rate securities arbitration claims against Citi Smith Barney and Raymond James Financial. As reported Nov. 9 by Investment News, a Miami FINRA (Financial Industry Regulatory Authority) panel denied claims brought by the Banco Industrial De Venezuela against Smith Barney in October. That same month, a Texas FINRA panel denied an investor’s claim involving more than $10 million worth of auction rate securities purchased from a Raymond James broker in 2006 and 2007.

For more than a year, thousands of retail and institutional investors have struggled to find a solution to their auction rate securities (ARS) woes. The problems began in February 2008 when the once $330 billion ARS market abruptly came to a standstill, leaving investors who thought their money was as liquid as cash in dire financial straits.

Following the collapse of the auction rate securities market, a number of state and federal investigations ensued. The result of those investigations led to allegations that many Wall Street firms aggressively marketed and sold auction rate securities as liquid cash investments, while failing to tell investors about the considerable risks associated with the instruments and the fact that the auctions for the securities could fail.

A number of Wall Street brokerage firms have since announced ARS buy back programs, agreeing to repurchase their clients’ auction-rate investments. In total, more than 20 firms - including Citigroup, Wachovia, Morgan Stanley, UBS, Goldman Sachs, Bank of America, TD Ameritrade, Fidelity Investments and Merrill Lynch, have agreed to repurchase $61 billion of the instruments from some customers.

In the recent case involving Raymond James Financial, it’s worth noting FINRA’s explanation of its decision (FINRA No. 08-03386) in the case. The panel’s findings state that Raymond James broker Rick Woolfolk “was poorly trained with respect to the ARS product. At various times, he described the investment as a unit trust, short-term paper or short-term stuff.”

The panel also noted that it was unclear whether the investor who purchased the auction-rate securities from Raymond James Financial was aware of the risks of failed auctions when he directed the initial purchase of the instruments. It was only after the purchase that Raymond James disclosed the risks of the products, according to the panel’s findings.

Despite denying all relief to the claimant, the FINRA panel said it remained “troubled by the inadequate training and other firm-related deficiencies” on the part of Raymond James Financial. Forum costs totaling $7,000 were assessed to Raymond James.

Meanwhile, investors continue to fight their ARS battles by filing individual arbitration claims against the brokerages that sold them investments in auction rate securities. As reported in a Nov. 8 article in the New York Times, almost 500 auction-rate securities claims have been filed by investors with FINRA following the collapse of the ARS market. A total of 253 are pending; 242 have been closed.

Seventeen claims have gone to a final hearing. Of those, investors won in four cases; a $400 million award was handed down by a panel in one matter. But 146 of the 242 closed cases were settled by the parties involved in the dispute, the New York Times reports. Settlement terms aren’t made public, but such deals typically involve refunding much, if not all, of investors’ money, the New York Times article states, citing lawyers who handle the cases.

Moreover, some settlements involve “consequential damages” - additional money awarded to cover investors’ costs of the arbitration proceedings or investment opportunities they missed because they were unable to access to their money.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

For many institutional and individual auction rate securities investors, life remains in limbo. Their investments, once touted by Wall Street as liquid as cash, have proven otherwise, leaving investors with no where to turn.

Before the ARS market seized up, municipalities, closed-end funds, student loan companies, hospitals and other non-profit entities issued auction rate securities in the form of preferred shares or as debt instruments to companies and individual investors. Problems in the $330 billion auction rate securities market came to a head in February 2008, when auctions for the instruments stopped trading. Since then, several of Wall Street’s major brokerage firms have taken steps to redeem their clients’ ARS holdings, or face the wrath of state securities regulators.

Some brokerage firms, including Oppenheimer and Raymond James, have not gone this route, however. This means their clients are essentially in the same position as they were a year ago. In other cases, investors’ efforts to retrieve their money through class action lawsuits are coming up short, according to a Nov. 8 article by Gretchen Morgenson in the New York Times. Judges overseeing at least 23 auction rate class actions have dismissed them in recent months, the article says.

A coalition comprised of 25 companies holding approximately $8 billion in frozen auction-rate securities backed by student loans is trying to draw attention to ARS illiquidity and the broader consequences of what will happen if there’s no solution to make good on the investments. The group contends if companies and individual investors were able to cash in their securities, the result would be an immediate $58 billion to $63 billion of economic stimulus. Currently, the coalition is taking its message to members of Congress and the Treasury Department, as well as other leaders in political and financial circles.

Individual investors, however, typically don’t have this kind of clout or resources. For them, filing an arbitration claim against the brokerage firm that initially sold them their auction rate securities may hold the most promise for resolution. As reported in the New York Times article, almost 500 auction-rate securities claims have been filed by investors with the Financial Industry Regulatory Authority (FINRA) since the collapse of the ARS market. A total of 253 are pending; 242 have been closed.

Seventeen claims have gone to a final hearing. Of those, investors won in four cases; a $400 million award was handed down by a panel in one matter. But 146 of the 242 closed cases were settled by the parties involved in the dispute, the New York Times reports. Settlement terms aren’t public, but such deals typically involve refunding much, if not all, of investors’ money, the article says, citing lawyers who handle the cases.

Moreover, as the New York Times points out, some settlements involve “consequential damages” - additional money awarded to cover investors’ costs or investment opportunities they missed because they didn’t have access to their funds.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options regarding auction rate securities. Tell us about your situation by leaving a message in the comment box or the Contact Us form.

The collapse of the auction rate securities market in February 2008 left millions of retail and institutional investors stuck with an investment that no one wanted to buy. Nearly a year later, little has changed for many ARS investors.

Many investors were under the impression auction-rate securities were safe, low-risk investments - financial products similar to a money market fund yet with a slightly higher return. At the same time, auction rate securities were supposed to be easy to sell - for their face value - at weekly or monthly auctions.

That didn’t happen, of course. Instead, the ARS market came to a standstill in 2008, and investors got stuck with securities that today pay extremely low yields. In some cases, the auction-rate securities will never mature, leaving ARS holders with the prospect of never getting their money back unless they part with their investments for rock-bottom prices.

As reported Oct. 11 by the New York Times, the biggest losers in the auction-rate securities debacle are institutional investors - corporations that bought the securities and were never covered by the settlements that many Wall Street firms made earlier this year to reimburse individual investors.

To a lesser extent, some retail investors are still stuck with their securities, either because their brokerage firm refused to settle or because they’ve moved from one firm to another and neither is willing to buy back the securities.

According to the New York Times article, some corporate ARS purchasers are in a Catch 22 position. They can’t sue the brokerages that misrepresented the auction-rate investments as safe and secure investments because of the Private Securities Litigation Reform Act law - a law that was strongly backed by corporate America as a way to curb frivolous lawsuits.

Specifically the Private Securities Litigation Reform Act dictates that when a case is filed it must be very detailed about the alleged fraud or it will be immediately dismissed. In many cases, though, a plaintiff needs access to inside information to make a claim with such information, which could be found in company files. Oftentimes, however, a plaintiff has no way to access such details before the case is thrown out, says the New York Times.

The latest reversal for investors came late last month when a federal judge dismissed a case filed against Raymond James, a brokerage firm that underwrote and sold auction-rate securities. In that case, a customer claimed that a broker at Raymond James misled her about the safety of auction-rate securities. As an underwriter and conductor of the auctions for the securities, the customer alleged that Raymond James was involved in a fraud to unload the securities before the market for them collapsed in February 2008.

The judge in the case says that’s not enough. The broker, he states, worked for one Raymond James company; the underwriting was done by a different Raymond James firm. “There is no evidence in the complaint,” the judge wrote, “from which the court can infer that the Raymond James entities had even the most basic understanding of the others’ business.”

To many, such reasoning sounds a little like a pitch to disguise the obvious. If the plaintiff could prove that one Raymond James subsidiary lied about the securities while another one profited from selling them the end result would likely prove the investor’s allegations of fraud. Yet, if there is no discovery of evidence allowed, we will never know whether such a claim could be proved.

The plaintiff in the case has until Oct. 16 to file an amended complaint that can pass muster under the 1995 law. The lawyer representing the investor says a new complaint will indeed be filed.

Tell us about your situation with auction rate securities by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

For more than a year now, retail and institutional investors of Raymond James Financial have patiently been waiting for an end to the nightmare known as auction-rate securities (ARS). The problems began in February 2008 when the once $330 billion ARS market abruptly came to a standstill, leaving investors who thought their money was as liquid as cash in dire financial straits. 

As reported Aug. 1 in the New York Times, the auction-rate securities mess hit individual investors especially hard, prompting investigations by state and federal regulators. The outcome of those investigations resulted in charges that many Wall Street firms aggressively marketed and sold auction-rate securities as liquid, cash investments, while failing to tell investors about the considerable risks associated with the instruments and the ARS market.

Since then, a number of major investment firms and brokerages agreed to settle charges by regulators and buy back ARS holdings from retail clients. Some firms, however, remained on the sidelines, refusing to make their clients whole by either redeeming their ARS investments or paying to recoup investors’ losses. One of those firms is Raymond James Financial.

Raymond James Financial is one of the nation’s last independent investment banks and brokerage firms. Last week, the company reported that its clients currently held about $800 million of illiquid auction-rate securities, down from $1 billion earlier this year, according to the New York Times.

The decline is tied to a series of redemptions by issuers of the securities, including closed-end funds and municipalities. So far, Raymond James has shown no interest in redeeming customers’ holdings, according to the New York Times story.

Redeeming the $800 million of auction-rate securities would be difficult, says Raymond James. The figure is equal to 4.4% of the company’s total assets and 42% of its shareholder equity.

That means Raymond James’ clients are no better off today than in February 2008, when the market for auction-rate securities collapsed.

The picture is much rosier for Raymond James’s CEO Thomas James. Last year, his company raised its dividend 10%. For James, who owns 12.2% of Raymond James Financial shares outstanding, the dividend increase translated into a payout of about $6 million. And the money will keep coming to James in 2009 if the company continues to pay the current rate of 44 cents a share.

On top of that financial bonanza, James saw a pay package valued at $3.55 million in 2008.

Besides executive compensation, Raymond James Financial spent $6.3 million during 2008 and 2009 for the naming rights to the stadium where the Tampa Bay Buccaneers play. That move alone begs the question: Why aren’t the clients of Raymond James viewed as valuable to the company as a corporate branding campaign?

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.