Raymond James’ Auction Rate Securities Problems Mount


A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Raymond James & Associates, Inc. and one of its registered representatives to pay $925,000 to a Texas couple who purchased $1.4 million of municipal auction rate securities issued by Jefferson County, Alabama, according to August 26th articles in InvestmentNews by Bruce Kelly (“Raymond James pays more auction rate claims”) and in the Wall Street Journal by Suzanne Barlyn (“Raymond James Forced to Buy Back Securities”).

In this case, the auction system failed before the claimants’ securities first came up for auction, thirty five days after they bought their Jefferson County sewer bonds. One of the three arbitrators specifically dissented as to the size of the award, writing “I believe the award to the Glenndennings should be $1,400,000.00 instead of $925,000.00.”

This case is the second time in a period of several weeks that Raymond James has been ordered to pay back auction rate securities customers, according to the WSJ. As the InvestmentNews article notes, this is the third time Raymond James has been ordered to return money to clients who purchased auction rate securities. So far, Raymond James reportedly has been ordered to pay $3.5 million.

When the auction rate securities market froze in February 2008, Raymond James’ client reportedly held $1.9 billion in auction rate debt. Its still hold $600 million in auction rate securities for which there is no active market, according to the article.
The arbitration award shows Wall Street’s misconduct that led to the market meltdown is still impacting investors more than three years after the crisis first struck the credit markets in mid-2007.

The $330 billion market for auction-rate securities froze in February 2008, when Wall Street dealers stopped supporting the periodic auctions that set the interest rates on long-term debt that Wall Street misrepresented as being safe, short-term “cash-equivalent” investments.

Raymond James has not yet been sued by a securities regulator in connection with sales of auction rate securities. Charles Schwab was sued by the New York attorney general for allegedly misrepresenting or failing to disclose the liquidity risks of auction rate securities. Likewise, the Massachusetts Securities Division ordered Oppenheimer & Co. to pay $56 million to auction rate securities investors and $250,000 to the state to cover the cost of its investigation.

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 30 occasions. Page Perry’s attorneys have extensive experience in representing investors in auction rate securities cases. For further information, please contact us.