Auction Rate Securities Update – Raymond James


Raymond James Financial claims that it would face a loss of $25 million to $50 million if it is forced to immediately repurchase auction-rate securities that it sold to clients, according to an InvestmentNews article by Bruce Kelly entitled “ARS mess could cost Raymond James up to $50M.” That would cut into the firm’s total revenues of over $1 billion for 2010, as well as the average payout of $311,513 for each of the firm’s 3,237 registered representatives in 2010, according to InvestmentNews’ B-D Data Center.

The Securities and Exchange Commission, the New York attorney general’s office and the Florida Office of Financial Regulation are all investigating Raymond James, and the firm has apparently had settlement discussions with regulators.

Raymond James ARS problems arose when the $330 billion market for auction-rate securities froze in February 2008, as a result of Wall Street dealers’ decision to stop supporting the periodic auctions that set the interest rates on these long-term instruments that brokerage firms had misrepresented as being safe, short-term “cash-equivalent” investments.

At the end of March 2008, Raymond James clients held about $370 million in auction-rate securities.

Many of the large investment banks that underwrote ARS quickly entered into settlements with regulators to buy back the securities from retail clients. Raymond James, however, refused to follow suit arguing that, although it sold ARS, it was not an underwriter of those securities and thus had no responsibility.

Fortunately, for investors, Raymond James’ efforts to rationalize its actions have fallen on deaf ears. As of August of 2010, Financial Industry Regulatory Authority (FINRA) arbitration panels had already ordered Raymond James to pay $3.5 million to ARS investors who brought arbitration claims against the firm.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in auction rate securities cases. For further information, please contact us.