Finra denies $ 36 million claim against Raymond James by former brokers


The Financial Industry Regulatory Authority has rejected a $ 36 million arbitration claim against Raymond James by three of his former brokers who claim they were vilified when the company terminated them for selling mutual funds.

Finra has denied the claims sought by Lynn Cooper Faust, Michael Anthony Faust and Joe Tom King Jr., three advisers fired by Raymond James in 2018 due to their ITU sales. In the end, only King received a reward: $ 500, of the $ 3.75 million he was seeking.

The brokerage giant said its three former brokers have used numerous short sales of mutual funds and reinvested the proceeds in other UITs to bolster their own compensation, without analyzing whether those securities are suitable for clients. All three brokers said the trusts had been approved by the company.

The Fausts work in Greenville, SC, and have since moved to Stifel Nicolaus; King works in Panama City, Florida, and is now with Ameriprise, according to his BrokerCheck profile.

Lynn Faust accused Raymond James of “burning his book” when he fired her in her U5 form. She sought $ 6 million in damages for this, as well as $ 1 million in defamation damages and $ 1.8 million in deferred lost compensation.

Michael Faust requested, among other things, $ 22 million for his own burnt business book, $ 1 million for defamation and $ 400,000 for deferred loss compensation. King asked for $ 2 million for his damaged business volume, as well as $ 1 million for libel. All three have requested that their U5 termination forms be removed or changed. And all three have sought damages for loss of life, disability and long-term care insurance.

Raymond James has filed a counterclaim that the three brokers should cover the repair payments the company owed to clients: $ 685,805 for clients of Lynn and Michael Faust and $ 114,480 for clients of King. The counterclaim was settled between the Faust and Raymond James. The counterclaim against King was dismissed.

Mutual funds hold a portfolio of securities like mutual funds, but their holdings are not actively traded and are often unmanaged. During the public offering, they offer investors “units” which are held until a specific termination date. Because they only have a specific number of units, they can also function as closed funds.

Critics say their features mean they’re not suitable for everyone. Indeed, Finra ordered Merrill Lynch, Pierce, Fenner & Smith to pay $ 8.4 million to 3,000 customers in June after customers saw their selling costs increase from the ITU’s first reversals.

“ITUs,” Finra wrote at the time, “are generally designed as long-term investments and have a cost to sell based on their long-term nature, including upfront and deferred selling costs and start-up costs. and development.

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