Raymond James & Associates, Inc. has agreed to pay $47,500 to settle charges it violated multiple municipal securities rules after the Financial Industry Regulatory Authority found it failed to accurately submit variable rate demand obligation interest rate information.
Raymond James agreed to pay the fine and be censured while neither admitting nor denying FINRA’s findings that it violated Municipal Securities Rulemaking Board Rules G-34 on CUSIP requirements, and Rule G-27, on supervision. The firm will be paying $32,500 for violating MSRB Rule G-34 and $15,000 for violating MSRB Rule G-27.
From April 1, 2009 to March 28, 2018, Raymond James did not accurately submit minimum denomination and maximum interest rates to the MSRB’s Short-term Obligation Rate Transparency System, SHORT, FINRA found. The SHORT system collects and disseminates information and documents on municipal securities bearing interest at short-term rates, including VRDOs.
In that time period, Raymond James also failed to establish and maintain a supervisory system, FINRA found.
As a remarketing agent for VRDOs, the firm did not include the minimum denomination or maximum interest rate in some instances when submitting interest rate resets to the SHORT system, FINRA found.
MSRB Rule G-34 requires each remarketing agent to submit VRDO interest rate reset information, including the minimum denomination and maximum interest rate. The minimum denomination of a muni bond is the lowest denomination of an issue that can be purchased or authorized by the bond documents. The maximum interest rate is the highest permissible rate for a muni security set by governing documents, like the official statement.
From April 1, 2013 through March 28, 2018, Raymond James failed to report the denomination in 2,925 submissions, a 6.36% error rate, FINRA alleged. The firm also did not report the maximum interest rate in 3,133 submissions, a 6.81% error rate, according to FINRA.
“The missing minimum denomination affected 27 CUSIPs, while the missing maximum interest rate affected 30 CUSIPs,” FINRA said.
Those reporting failures happened because the firm’s reporting system did not require entering in minimum denomination and maximum interest rate fields, FINRA said.
“Raymond James traders mistakenly left the minimum denomination and maximum interest rate fields blank,” FINRA said.
From April 2009 through July 2018, FINRA found Raymond James did not maintain an adequate supervisory system.
“Until April 2018, the firm’s supervisory system failed to include a review designed to determine whether it had submitted all required information to the SHORT system, and whether that submitted information, including the minimum denomination and maximum interest rate, was accurate,” FINRA said.
Raymond James did not respond to a request for comment.
