Raymond James Financial Services Inc. has paid a $1.79 million arbitration award to an 87-year-old client after going to state court to appeal the judgment.
Judge Emily Tobolowsky of the 298th Judicial District Court in Dallas last month confirmed the award and denied the broker-dealer's motion to vacate the payment, a move that few broker-dealers attempt to make.
In May, a Financial Industry Regulatory Authority Inc. arbitration panel ordered RJ to pay some $1.7 million, plus interest, to elderly client Hurshel Tyler and the estate of his deceased wife, Mildred. It is the largest arbitration award against the broker-dealer.
The Tylers, both in their late 80s when the case first went to arbitration, had some $3.5 million in bond funds. But they allegedly were encouraged by a former Raymond James broker, then based in Amarillo, Texas, to put the money into variable annuities and variable life insurance.
The variable life insurance policy was loaded with $2 million in improper loans — along with continuing tax and interest obligations — that would have made it difficult to return the product to the broker-dealer, according to a transcript from a court hearing in September.
“From a supervisory standpoint, the large loans taken out against the policy should have been red-flagged,” the Tylers' attorney, Tracy Pride Stoneman, said in an interview.
In their complaint, the couple contended that the investments were unsuitable; the Finra arbitration panel decided in their favor.
In appealing the decision, Raymond James claimed that the Tylers should have returned the annuities, which had grown by more than $958,000.
Initially, the elderly couple had sought return of their money but instead were awarded compensatory damages and weren't instructed to return the annuities.
The firm also had argued that the $250,000 it was supposed to pay the Tylers in attorneys' fees ought to be vacated because laws in Florida — where Raymond James is based — don't allow for such awards.
But Ms. Stoneman said that Raymond James never brought up that argument in the arbitration discussions in March this year, nor did it ever object to her presentation of the case under Texas law.
“Raymond James continues to believe that the award in this matter is a miscarriage of justice," said Robert M. Rudnicki, vice president and director of litigation at Raymond James. "The Tylers made a profit in excess of $800,000 during the period of time that the Tylers maintained accounts with Raymond James and suffered losses when they transferred their accounts to another broker-dealer."
He added that Raymond James believes the panel erroneously held the brokerage responsible for those losses. "Notwithstanding that fact," Mr. Rudnicki noted, "Raymond James has determined, after reviewing the anticipated time and resources necessary to continue to fight what we still believe to be an erroneous award, to put the matter behind us and move forward.”
dmercado@investmentnews.com
