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Raymond James Loses $1.8 Million Arbitration Over Penny Stocks

May 9, 2019

Raymond James is on the hook for $1.8 million over the alleged actions of a broker at firm it acquired in 2012, according to news reports.

A Finra arbitration panel has ruled in favor of 20 claimants who said in a 2017 claim that an unnamed Morgan Keegan broker in Jackson, Miss., invested their retirement savings in unsuitable penny stocks of two Canadian energy companies, InvestmentNews writes.

Raymond James acquired Morgan Keegan in 2012, according to the publication.

The broker allegedly pushed the penny stocks starting in 2006, touting them as sure winners, even though the transactions were prohibited by Morgan Keegan, Judson Lee, owner of an eponymous law firm in Madison, Miss., who represented the claimants, tells InvestmentNews.

"These were sure losers," he tells the publication. "Any financial adviser who peeled back the layers to look at this would know they were unsuitable for clients. This was a wholesale failure to supervise a broker."

The claimants didn’t find out that the transactions were prohibited by Morgan Keegan until “years later,” Lee tells InvestmentNews.

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The arbitration panel ordered Raymond James to pay compensatory damages of $1.1 million and punitive damages of $200,000, as well as $442,000 in lawyers’ fees, $14,000 in costs and $31,003 in expert witness fees, according to the publication.

A Raymond James spokeswoman declined comment to InvestmentNews and lawyers for the firm and for the manager of the Jackson, Miss., branch didn’t respond to its request for comment.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.