Raymond James Settles ARS Case with Texas for Just Under $300,000

Raymond James Financial Services, Incorporated has agreed to pay the State of Texas $293,595 to settle claims that they failed to disclose material risks associated with auction rate securities (ARS), according to a release by the Texas State Securities Board. Securities Commissioner Benette Zivley announced that under this settlement, Raymond James is going to repurchase roughly $300 million of the ARS it sold to investors across the nation, including those located in Texas. The multistate investigation into Raymond James' marketing and sales tactics regarding the auction rate securities (ARS) was led by Texas and Florida, where Raymond James is based.

As with all of the other auction rate securities (ARS) that were offered, the registered representatives and financial advisers at Raymond James promised that the auction rate securities were safe, cash equivalents and extremely liquid short term investments that served to produce a higher return than money market accounts (MMA) and certificates of deposit (CDs). Unfortunately, the folks at Raymond James failed to explain to their customers that the auction rate securities (ARS) could become illiquid if the auction process failed. Raymond James therefore failed in their responsibilities to assure that its representatives were knowledgeable about the products they were selling. When the ARS market froze in February 2008, investors were unable to access their funds invested in the securities. Raymond James is set to pay a $1.75 million fine nationally to settle the ARS cases.

The Consent Order entered into by Raymond James establishes a toll free number for ARS investors to call and a special arbitration process for investors claiming that they were unable to sell their securities or access their funds.

According to the Texas State Securities Board, Texas investors have recovered roughly $9 billion from state and nationwide investigations into the auction rate securities (ARS) mess and the State of Texas General Fund has received $39 million in fines from ARS cases.

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