Raymond James Refuses Auction-Rate Securities Buyback – Leaves Its Clients “Out In The Cold”


Investors holding auction-rate securities (“ARS”) sold by Raymond James will have to initiate legal action against the firm to recoup their ARS losses or prepare for a long wait as they continue to hold the illiquid securities. Although under investigation from the SEC, the Florida Office of Financial Regulation and the New York Attorney General’s Office, Raymond James recently sent out a letter to its purchasers of ARS indicating that it refuses to buy back their securities due to lack of funds.

The amount of money needed to settle with the aggrieved investors is apparently substantial. When the ARS market collapsed in early 2008, Raymond James’ clients held over $2.3 billion of outstanding ARS. It appears that Raymond James’ clients left holding these securities are, to say the least, not pleased. Apparently the reason for the recent letter is that Raymond James has received an increasing number of complaints over the past few months from clients who learned that other major broker-dealer firms have repurchased their clients’ ARS.

While the top five underwriters of ARS spent over $2 billion in the third quarter of 2008 in buyback and liquidity programs, it appears that Raymond James is digging in for a fight with its investors over ARS abuses. Along with indicating it did not have the money to buy back its clients’ ARS, Raymond James also indicated that it is not motivated to settle because it believes that the firm did not engage in the same types of misconduct as occurred at other firms. Whether Raymond James is refusing to settle its ARS claims because it is really short of cash and does not believe it has any liability or whether this is a tactic by Raymond James to try and buy time and stem off the inevitable waive of litigation — remains to be seen.

Pratt Davis, an attorney with Page Perry, LCC in Atlanta, observed that “Raymond James’ action is simply appalling. The firm is clearly putting its own interest ahead of its clients’ interest and violating its fundamental duty to deal fairly with its clients.”

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, and have aided clients who have been the victims of financial adviser abuse, unsuitable recommendations, and scams. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.