An IIROC hearing panel has fined Raymond James $75,000 for inadequate supervision that failed to flag fee-based accounts for review.
The failure, which occurred between 2012 and 2016, was the result of insufficient procedures, says the settlement agreement. One procedure based on two conditions—average monthly fees together with a set range of trades per year—excluded some fee-based accounts, in particular those below $420,000, says the settlement agreement.
Further, some excluded fee-based accounts had large cash holdings that remained uninvested. Prior to 2017, the firm had no procedures in place to detect instances of uninvested cash, says the agreement.
In the case of one former advisor, uninvested cash and associated issues resulted in four client complaints from two families and a subsequent settlement agreement between IIROC and the advisor. Among other things, the advisor admitted that, given the cash holdings and limited trading in the accounts, fees charged were much more than they would have been in commissions-based accounts.
The firm has provided evidence of an “ongoing, proactive and comprehensive review of its supervision systems and procedures,” says the settlement agreement.
Further, the firm issued an internal compliance bulletin alerting advisors and staff to the problem of inactive fee-based accounts being subject to full fees, and stating that cash positions should be invested per client account objectives.
By year-end, Raymond James must develop amended policies for fee-based accounts, and those policies will be reviewed during IIROC’s next business compliance exam, says the settlement agreement.
In addition to the fine, the firm must pay costs of $2,500.
For full details, read the settlement agreement.