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Raymond James Asks Appeals Court to Reject Class Action Certification of Passport Accounts Lawsuit

By Miriam Rozen January 28, 2019

Raymond James earlier this month asked an appeals court to review a Florida federal judge’s order certifying a class of plaintiffs of nearly 50,000 existing and former clients. The class-action lawsuit is based on allegations that Raymond James required those clients to pay fees on ostensibly commission-free “Passport Investment Accounts.”

In its notice seeking the higher court’s review, Raymond James argues that the trial judge failed to conduct rigorous analysis before certifying the plaintiffs’ class. The company also argues that each of the proposed class members’ claims should be litigated individually because each of their circumstances is likely to differ.

Central to the plaintiffs’ claims are Raymond James’ processing fees for these so-called passport accounts. The plaintiffs argue those fees simply masked commissions given to the broker dealer on transactions.

On its website, Raymond James describes these passport accounts as self-directed accounts that tailor a diversified portfolio according to the clients’ investing goals, risk tolerance, time frame and budget. “You pay no traditional commissions – just an asset-based fee and low transaction charges,” according to the information on the website, which also says the minimum investment is $25,000.

In its appeal notice, Raymond James argues: “It is impossible to ascertain which clients actually paid processing fees without conducting a transaction-by-transaction review of a million-plus trades, as well as what amounts those clients paid … That alone should have defeated class certification.” Samuel Braver at Tampa, Fla.-based law firm Buchanan Ingersoll & Rooney, represents Raymond James in the litigation and wrote the appeal notice.

Neither Braver nor a Raymond James spokesperson returned requests for comment for this story.

Late last year, the Florida federal trial court granted the certification after the class-action lawsuit’s named plaintiff, Jyll Brink, made breach-of-contract and negligence claims. In Brink’s complaint filed on Sept. 18, 2018, Brink alleged: “The Processing Fee charged by Raymond James contained up to a 1,000% mark-up for profit in some instances (and a significant mark-up in all instances), and as such, was transaction-based remuneration to Raymond James – an unauthorized commission in an account that is supposed to be commission free.”

According to Brink’s complaint, a transaction spreadsheet produced by Raymond James shows related data for more than a million trades in passport accounts for 58,610 holders of the account.

Clients had to pay the entire processing fee 94% of the time, while financial advisors only paid them 4% of the time, for around 2,800 passport account holders, according to her complaint. The court did not include in the class the holders of the nearly 3,000 accounts where advisors either paid all or some of the processing fees.

In its response to that complaint, Raymond James argued that Brink had voluntarily paid the processing fee and her claims for breach of contract and negligence should therefore fail.

In past years, broker-dealers and their clients have litigated the question of what constitutes a commission.

“This issue of whether or not a fee is in reality a commission has been the subject of past Finra enforcement actions, thus the issues being litigated in this case are not new or novel,” Bradley Bennett, the former head of Finra enforcement, who practices law in Washington, D.C., told FA-IQ previously.

Eric Sodhi, a partner in the Miami law firm of Sodhi Spoont, who represents Brink, did not return a request for comment for this story. But Sodhi previously told FA-IQ the fees charged were not limited to amounts to defray costs associated with executing and clearing trades.