FINRA Orders Raymond James to Pay $1.69 Million for Charging Unfair Commissions

Yet another example of “Fair Prices and Commissions Rule” violation……

FINRA has now ordered Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. to pay restitution of $1.69 million to more than 15,500 investors who were charged unfair and unreasonable commissions on securities transactions. FINRA also fined the two entities $225,000 and $200,000, respectively, and is requiring the each firm to calculate and repay additional overcharges from Nov. 1, 2010, through the date that they each revised their schedule.

FINRA charged that from Jan. 1, 2006 to Oct. 31, 2010, the two companies used automated commission schedules for equity transactions that charged more than15,500 customers nearly $1.69 million in excessive commissions on over 27,000 transactions involving, in most instances, low-priced securities. FINRA found that the firms’ supervisory systems were inadequate because the firms established inflated schedules and rates without proper consideration of the factors necessary to determine the fairness of the commissions, including the type of security and the size of the transaction. See more…

FINRA Webinar to Examine Enforcement Trends

FINRA will host a live one-hour webinar on October 12, 2011(1:30 PM (EST)/ 10:30 AM (PT) examining recent enforcement actions against broker-dealers and registered representatives. The program will provide an overview of new developments and trends. In addition, panelists will discuss improving broker-dealer compliance programs by applying lessons learned from enforcement actions. See more…

NASAA Will Continue IARD System Fee Waiver

The North American Securities Administrators Association (NASAA) recently announced that it will waive the initial set-up and annual system fees paid by investment adviser firms (IAs) and investment representatives (IARs) to maintain the Investment Adviser Registration Depository (IARD) system. Noting that state securities regulators were sensitive to the cost of compliance borne by investment advisers, many of which operate small businesses in local communities, Jack Herstein, NASAA President and Assistant Director of the Nebraska Department of Banking & Finance Bureau of Securities stated that “any cost savings that can be achieved without weakening investor protection will benefit both investors and small businesses in a struggling economy.” See more…

Will FINRA Become the New Regulator for Investment Advisers?

Yesterday, in front of the House Financial Services Capital Markets SubCommittee, Richard Ketchum, CEO of the Financial Industry Regulatory Authority (FINRA) testified that FINRA is prepared to assume the regulation of investment advisers. Ketchum noted that while the SEC oversees more than 11,000 investment advisers, but in 2010 conducted only 1,083 exams of those firms due to lack of resources. Noting two studies related to the regulation of broker-dealers and investment advisers that were completed by the SEC in January, Ketchum stated, “the average registered adviser could expect to be examined less than once every 11 years.” This means that “[w]hile the SEC examines only about 9 percent of investment advisers each year, 55 percent of broker-dealers are examined each year by the SEC and FINRA,” he said.

The SEC’s study on investment adviser exams concluded that, going forward, the Commission would not have sufficient capacity to conduct effective registered investment advisers examinations with adequate frequency. Further, the study found that enhanced examination responsibilities given the SEC under Dodd-Frank meant that an increase in agency examination staff “is unlikely to keep pace with the growth of registered investment advisers.”

Making the argument that if FINRA were to become the SRO for investment advisers, Ketchum pledged that FINRA would establish a separate entity with separate board and committee governance to oversee any adviser work, and would plan to hire additional staff with expertise and leadership in the adviser area. He argued that FINRA possessed the experience operating a nationwide program for examinations and had the ability to leverage existing technology and staff resources to support a similar program for investment advisers. See more…