By Jeff Harrington, Times Staff Writer
Thursday, August 26, 2010
Raymond James & Associates and one of the St. Petersburg brokerage firm's advisers must pay $925,000 to a Texas couple that bought auction-rate securities in 2008, a securities industry arbitration panel has ruled.
The Financial Industry Regulation Authority (Finra) panel found that Raymond James broker Larry Milton of Fort Worth, Texas, failed to disclose the risk of an auction-rate securities investment to Rex and Sherese Glendenning.
The Glendennings had sought $1.4 million for their fizzled investments after a meltdown in the auction rate-securities (ARS) market two years ago. Under the panel ruling, the couple must sign over the securities to Raymond James for $925,000. One of the three arbitrators argued unsuccessfully that Raymond James should have paid the couple the full $1.4 million.
A Raymond James spokeswoman declined comment.
Auction-rate securities, long-term debt instruments designed to trade like short-term securities, were often pitched to investors as safe and easily redeemable at any time. During the credit crunch of 2008, however, the $300 billion ARS market suddenly seized up.
Some other brokers offered to cover customers whose accounts had become illiquid. But Raymond James angered some clients by resisting settlements, saying it didn't have "anything near" the $1 billion outstanding owed to clients. Raymond James spokeswoman Anthea Penrose said the company currently has about $600 million worth of auction-rate securities on its books.