Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, June 30, 2011

Raymond James Agrees to Buy Back ARS from Customers

Both the SEC and NASAA announced settlements with Raymond James requiring the firm to repurchase auction rate securities (ARS) bought before the 2008 financial collapse.  

According to the SEC’s administrative order, some registered representatives and financial advisers at Raymond James told customers that ARS were safe, liquid alternatives to money market funds and other cash-like investments. Among other things, representatives at Raymond James did not provide customers with adequate and complete disclosures regarding the complexity and risks of ARS, including their dependence on successful auctions for liquidity.

Without admitting or denying the SEC’s allegations, Raymond James consented to the SEC’s order and agreed to:

  • Offer to purchase eligible ARS from its eligible current and former customers.
     
    Use its best efforts to provide liquidity solutions to customers who acted as institutional money managers who are not otherwise eligible customers.
     
    Reimburse excess interest costs to eligible ARS customers who took out loans from Raymond James after Feb. 13, 2008.
     
    Compensate eligible customers who sold their ARS below par by paying the difference between par and the sale price of the ARS, plus reasonable interest.
     
    At the customer’s election, participate in a special arbitration process with those eligible customers who claim additional damages.
     
    Establish a toll-free telephone assistance line and a public Internet page to respond to questions concerning the terms of the settlement.

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