RayJay Resolves Class-Action Suits Alleging Hidden Commissions: Court Filing
Raymond James Financial appears to be clearing a legal cloud involving lawsuits from customers who alleged it earned unauthorized and undisclosed profits in self-directed, fee-based accounts at its brokerage units.
The two cases involve the firm’s Passport accounts, which are marketed as charging “just an asset-based fee and low transaction charges,” but which lawsuit participants said brought the firm “unauthorized and undisclosed profits” due to processing fees that were the equivalent of undisclosed commissions.
The litigation has drawn attention in legal circles and from Raymond James shareholders because a federal appeals court overruled a lower-court decision in one of the cases (Jyll Brink v. Raymond James & Associates) last year, allowing it to proceed as a class-action. The decision led the Florida-based firm to identify Brink and a second purported class-action (Wistar and Mayeaux v. Raymond James Financial Services) in regulatory filings as events that “could be material to our operating results and cash flows for a particular [reporting] period.”
In a filing last week in the southern district of Florida’s Fort Lauderdale division, lawyers for both parties said they have successfully mediated the cases and were granted permission to consolidate them for purposes of saving time and resources. The settlement was reached days before a jury trial had been scheduled on April 15.
“The parties conducted a joint mediation of both cases over two days of April 4-5, 2019 and reached a global settlement of both cases,” lawyers wrote in an April 17 filing. The lawyers will move forward to schedule notices to class members about deadlines for filing objections or to exclude themselves from the settlement, the filing said.
It did not disclose the settlement amount.
Sam Braver, an attorney representing Raymond James at the firm of Buchanan Ingersoll & Rooney in Tampa, declined to comment.
Neither Raymond James spokespeople nor Darren Blum, a Fort Lauderdale lawyer and spokesman for the plaintiffs attorneys in both cases, returned requests for comment.
The cases had potentially widespread implications for brokerage firms that have been aggressively promoting advisory accounts that charge fees based on client assets.
Raymond James’ private client group, which includes more than 7,800 brokers, ended its fiscal year 2018 on September 30 with $366.3 billion in fee-based accounts, up 24% from a year earlier. The accounts represented 48% of the retail brokerage’s $756 billion of customer assets under administration.