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Raymond James Fined $2 Million for Failure to Implement Adequate Supervisory System

On December 21st, 2017, the FINRA Department of Enforcement announced a $2 million fine against Raymond James Financial Services, Inc (CRD No. 6694), a large brokerage firm headquartered in St. Petersburg, Florida. According to the investigation conducted by FINRA staff members, Raymond James failed to design and implement an adequate supervisory system to monitor the email communications of its securities representatives. This is a major violation of industry rules, and it put Raymond James customers at serious risk of becoming victims of investment fraud.

Understanding the Failure to Implement an Effective Supervisory System 

The relevant time period in this case ran from December of 2007 through September of 2017. During this decade long stretch of time, Raymond James failed to design and implement an effective system to oversee the email communications of its individual brokers. More specifically, FINRA investigators found that the brokerage firm relied almost entirely on a ‘lexicon-based’ system to identify potentially problematic conduct. This system was not adequate. As a result, the brokerage firm put itself in a position that made it difficult to catch some red flags. The firm’s weak oversight resulted in it not closely monitoring:

  • Brokers who were experiencing financial distress;
  • Brokers who were borrowing from firm customers; and
  • Brokers who were engaged in risky penny stock transactions.

To compound the problem, Raymond James also had far too few personnel that were assigned to review the emails that were actually flagged by the supervisory system. As the firm continued to grow in size, its compliance department did not grow at a similar rate. This failure to keep up with the changing times put investors at considerable financial risk.

Brokerage Firms Have a Duty to Supervise Securities Representatives 

FINRA regulations compel registered brokerage firms to supervise individual brokers. Several industry rules, including FINRA Rule 3110, FINRA Rule 3120, and FINRA Rule 3130, lay out supervisory procedures that must be followed by all registered brokerage firms. If your brokerage firm negligently failed to supervise one of its representatives, and you sustained financial losses as a result of that representative’s misconduct, you may be able to hold your brokerage firm legally liable for your losses. You should consult with a qualified Miami brokerage negligence attorney as soon as possible. Failure to supervise investment fraud claims are notoriously complex. You should not try to take on your brokerage firm all on your own. Your attorney will be able to help you navigate the process and secure the evidence that is necessary to make a strong legal case.

Contact Our Experienced Miami, FL Investment Fraud Lawyers Today 

At Carlson & Associates, P.A., our dedicated South Florida securities fraud lawyers have helped many investors recover money for their investment losses. If you sustained losses due to your broker-dealer’s failure to establish or implement an effective supervisory system, our legal team is standing by, ready to help. Please do not hesitate to contact our Miami office today to set up a fully confidential review of your investment fraud claim.

Resource:

brokercheck.finra.org/firm/summary/6694

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