FINRA fined Raymond James $2 million after finding that a flawed e-mail review system allowed millions of e-mails to evade adequate review, creating "unreasonable risk" that misconduct by firm personnel could go undetected by the firm, including one notable instance of Raymond James' failure to detect a $1 million fraud.
According to the findings, the e-mail supervision and review failure began in 2007 and lasted until September 2017, affecting 1,300 registered representatives' electronic communications.
AWC #2013036343601
Investigators referenced an example of the harmful nature of Raymond James' e-mail review deficiency: the firm's failure to detect that one of its ex-representatives fraudulently sold approximately $1 million in unregistered notes, resulting in "substantial losses" for some customers.
FINRA found at least 16 separate instances in which the firm could have detected and/or addressed that specific improper activity; however, because of the deficient supervision, FINRA wrote, the fraud went undetected until several years after the last customer had already invested.
Even worse, FINRA uncovered a manual review system employed by some branches and managers that "was essentially based on an 'honor system,'" wherein representatives purportedly self-selected which e-mails of theirs were to be reviewed.
According to a 2016 study, 13.74% of Raymond James' financial advisers have previously been disciplined for misconduct, which is eighth-highest in the securities industry. 13.74% of the 1,300 reps whose e-mail communications were inadequately supervised corresponds to approximately 178 reps with a history of discipline whose e-mail communications evaded firm oversight, review, or supervision.
The present action follows FINRA's 2016 imposition of a $17 million fine upon Raymond James for widespread compliance failures related to anti-money laundering (AML) systems.
In May 2017, FINRA barred former Raymond James & Associates broker Scott Allen Sibley for participating in 900 unauthorized securities transactions in a disabled client's account, and for unsuitable recommendations, over-concentration, and unauthorized use of discretion in 10 other elderly clients' accounts.
If you have invested with a Raymond James representative, broker, or financial adviser whose unsupervised e-mail communications, such as those conducted using personal non-firm e-mail addresses (e.g., from a gmail.com or yahoo.com account) or those which involved selling unregistered notes or other products away from the firm, have proven harmful to your investments or interests due to the firm's failure to supervise its registered personnel and detect such misconduct, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.