State Securities Regulators Announce Settlement with Raymond James in Auction Rate Securities Investigations

WASHINGTON, D.C., June 29, 2011 — The North American Securities Administrators Association (NASAA) today announced that a settlement in principle has been reached between Raymond James Financial Services, Inc. and state securities regulators to return approximately $300 million to the firm’s clients who have had their funds frozen in the auction rate securities (ARS) market since 2008.

Since the ARS market collapsed three years ago, state securities regulators have secured settlements calling for firms to repurchase from investors more than $61 billion in auction rate securities, the largest return of funds to investors in history.

The settlement with Raymond James is the result of an investigation led by the Florida Office of Financial Regulation and the Texas State Securities Board into allegations that the firm misled clients by falsely assuring them that auction rate securities were a safe, liquid alternative to cash, certificates of deposit and money market funds. The ARS markets froze in February 2008, triggering complaints from investors who could not withdraw money from their accounts.

The settlement requires the St. Petersburg, Florida, firm to extend offers to repurchase auction rate securities from its retail customers nationwide within the next 30 days. The purchase offer is to remain open for 75 days following the distribution of the initial notice to individual investors.

“Today’s settlement will provide much-needed relief to investors who continue to suffer from the collapse of the auction rate securities markets,” said David Massey, NASAA President and North Carolina Deputy Securities Administrator. “This settlement is the most recent example of how states initiate a collaborative approach to a national problem. We will continue to seek relief for investors who suffered from the collapse of the ARS markets.”

Under the terms of the settlement, Raymond James agreed to buy back at par value all auction rate securities purchased through the firm by individual investors before February 13, 2008.

Other terms of the multi-state settlement require Raymond James to:

  • Fully reimburse all individual investors who sold their auction rate securities at a discount after the auction market failed;
  • Consent to a special, public arbitration process to resolve claims of consequential damages suffered by individual investors who were unable to access their funds;
  • Make “best efforts” to provide liquidity solutions to all institutional investors;
  • Maintain a dedicated toll-free telephone assistance line, website and email address to provide information about the terms of the Final Order and to answer questions from investors;
  • Reimburse certain investors for the cost of loans after the investor took out a loan from Raymond James because the investor’s auction rate securities were frozen; and
  • Pay to the states monetary penalties of $1.75 million.

Massey commended the work of state securities regulators in Florida and Texas, who co-led the settlement negotiations, as well as those in Indiana, New York, North Carolina, Pennsylvania and South Carolina, who participated in the investigation. The settlement was reached in close cooperation with the Miami Regional Office of the U.S. Securities and Exchange Commission, which will enter its own order and related documents.

The investigation into possible violations by Raymond James is part of a larger, ongoing state-led effort to address problems in connection with the offer and sale of ARS investments. In 2008, state securities regulators began receiving hundreds of complaints from Main Street investors. As a result, in April 2008, NASAA announced the formation of a multi-state task force, comprised of securities regulators in 12 states, to investigate whether the nation’s prominent financial firms had systematically misled investors when placing them in ARS investments.

NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico.

For more information:
Bob Webster, Director of Communications
202-737-0900

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