Finra Slams RayJay Recruiting, Cites Client Privacy Violations
Raymond James Financial flaunts its broker-centric culture as a major reason for its recent recruiting successes but a regulator on Wednesday imposed a half-million-dollar fine and censure on the company for moving too fast with the hiring process.
The St. Petersburg, Fla., firm, agreed to the $500,000 settlement with the Financial Industry Regulatory Authority over charges of privacy law violations from January 2011 to March 31, 2015.
According to a consent letter posted Wednesday on Finra’s disciplinary actions page, Raymond James’ transition management department assisted brokers in transferring client names, addresses and basic account information before they had resigned from their former firms. The alleged violations of federal privacy laws occurred at Raymond James’s traditional employee branches and in its independent brokerage channel.
The company, which neither admitted nor denied the violations, then used the nonpublic client information to pre-populate new account forms, Finra said.
Raymond James’ brokerage count in the four-year settlement period grew 32% to 5,918, or roughly 1,400 advisers. (That includes several hundred brokers who joined as part of Raymond James’ 2012 acquisition of Morgan Keegan.)
The settlement could dilute some of the success RayJay claims it reaps from recruiting strategies that include flying prospects to St. Petersburg for sit-downs with C-Level executives. Raymond James also forbids brokers from soliciting clients of colleagues who leave, a commonplace industry practice that Chief Executive Paul Reilly says creates distrust between firms and their brokers.
But the acceptance, waiver and consent letter that Raymond James signed with Finra also hints at some hard-nosed recruiting practices and supervisory failures among internal recruiters. Finra cited inadequate systems and lapses in training of “transition” specialists working with broker prospects.
“They jumped the gun,” said Marc Dobin, a lawyer in Jupiter, Fla. who specializes in securities arbitration. “You can’t give customer data to the firm that’s hiring you until you’re their employee.”
Finra’s settlement noted that the $500,000 penalty is double what Raymond James paid in September 2012 for “inadvertently: disclosing personally identifiable information and failing to properly safeguard such data.
Anthea Penrose, a spokeswoman for Raymond James’s wealth management businesses, did not respond to a request for comment on the settlement.