A Dallas district court upheld a $1.7 million FINRA arbitration panel’s penalty against Raymond James Financial Services over how a former independent contractor handled the finances of an elderly Texas man and the estate of his deceased wife.

The Texas man’s attorney announced the district court’s October decision earlier this week. In its two-page decision, the court supported the arbitration panel’s finding in May that the advisor, Paul Davis, had improperly managed the elderly couple’s portfolio using life insurance and variable annuities.

The panel also found that Raymond James had failed to properly supervise Davis. As a result, Raymond James Financial paid the award to Hershel Tyler, 87.

“Raymond James continues to believe that the award in this matter is a miscarriage of justice,” according to an email statement from Robert M. Rudnicki, the firm’s vice president and director of litigation. “Raymond James believes the panel erroneously held Raymond James responsible for those losses.”

Raymond James previously said that the Tylers actually turned an $800,000 profit on their investments while Davis remained at the broker-dealer. The couple willingly followed Davis when he changed jobs and joined LPL in 2006, and brought their accounts with them. Subsequent trading at LPL incurred the losses at the heart of the complaint, the company said. Stoneman had settled damages with LPL before the arbitration with Raymond James.

“They get into dangerous waters when they even contemplate ‘switching’ from annuities to another investment,” said Tracy Pride Stoneman, the Westcliffe, Colo.-based attorney who represented the clients. “There are so many reasons why that is not in the financial best interest of the customer. What was apparent was the lack of supervisory controls.”

Davis had apparently switched the Tylers out of their municipal bond portfolio entirely, and put them into high-commission variable annuities and life insurance policies. Without their knowledge, Davis then moved them from one variable annuity to another, costing the couple large surrender fees and commissions, Stoneman said. Davis also orchestrated loans against the insurance policy and used the proceeds to buy other annuities, she said.

“The loans against the policies should have been huge red flags for compliance,” Stoneman said.