A broker-dealer unit of Raymond James Financial agreed to pay $500,000 as part of a settlement with the Securities and Exchange Commission (SEC) for alleged supervisory failures that included the input of a misinformed compliance officer.
Raymond James & Associates did not clearly communicate to compliance and supervisory staff procedures regarding a group the business formed to help protect senior and at-risk clients, resulting in a compliance officer misunderstanding the purpose of the group’s investigations, the SEC alleged in its order filed Thursday. As a result, activities by a former registered representative at the firm, Frederick Stow, who was misappropriating funds from two elderly customers’ accounts were allowed to continue, according to the agency.
Stow, who eventually admitted his misconduct, was sentenced to five years in prison by the Department of Justice in May 2021 after pleading guilty to securities fraud, wire fraud, and aggravated identity theft.
Stow’s activities took place from October 2015 through April 2019. In June 2018, a branch manager at Raymond James engaged with his supervisors and a firm compliance officer regarding concerns he had about Stow after reviewing the accounts of elderly customers, according to the SEC.
The supervisors and compliance officer ultimately determined to escalate their concerns to the senior and at-risk clients group, which had been formed by Raymond James in 2017. What they didn’t know, however, was that the group was charged with investigating “whether a person outside the firm could be taking advantage of a senior customer,” the SEC stated. So, when the group did not act after the compliance officer had referred Stow’s accounts to it, the compliance officer and supervisor accepted the findings.
“Because there was no change in circumstances to warrant an additional inquiry beyond what had already been completed, Raymond James did not conduct any further meaningful supervisory inquiry specifically directed at Stow’s potential theft,” the SEC stated.
Stow’s performance would further decline as he continued to misappropriate money from the customer accounts. In May 2019, he confessed his crimes to the branch manager, according to the order.
Raymond James failed to reasonably supervise Stow within the requirements of the Securities Exchange Act, the SEC alleged. Without admitting or denying the agency’s findings, Raymond James agreed to pay the fine and consented to a censure.
Raymond James did not return a request for comment.