Raymond James Financial Services has challenged a $1.7 million FINRA arbitration award that was handed down in May, saying questionable transactions should have been nullified in the case, and that the panel overstepped its authority in granting certain parts of the award.
Raymond James argued that the variable annuity transactions in the original case -- which actually turned an $800,000 profit for the client -- should have been rescinded. This is what the clients in the original case, Hurshel Tyler and the estate of his late wife, Mildred Tyler, wanted.
“They and their counsel made it abundantly clear that the only remedy they were seeking was rescission,” according to the complaint from Raymond James, referring to the Tylers. “They advised the panel that this rescission would entail [the Tylers] returning the annuities at issue.”
Instead, the panel awarded a monetary award, which failed to require the return of the securities [that] made the bases of the transaction, according to Raymond James filing. “As such, there is an evident miscalculation of numbers, which this court may correct.”
The broker-dealer, based in St. Petersburg, Fla., also claimed that the court should vacate the portion of the award that grants attorney fees, because the arbitrators exceeded their powers. Apparently, the Tylers had signed an agreement, which said any of their complaints or arbitrations would be settled under Florida law, which disallows attorney fees. By invoking the Texas statute on breach of contract, the company argued, the arbitrators overstepped their authority.
“The firm’s proclamation that ‘the panel ordered rescission’ has no basis that I can see,” according to an email statement from Tracy Pride Stoneman, a Westcliffe, Colo.-based attorney who represented the Tylers.
Stoneman also states that she was shocked by Raymond James Financial Services' claim that arbitration should have been decided according to Florida law. The broker dealer had stated only once -- in its response to the original complaint -- that Florida law should apply, Stoneman said, even though she definitely argued that Texas law should apply in the case. Their representatives never challenged that during the 5-day arbitration, she said.
On May 10, the panel had found that Raymond James Financial Services failed to properly supervise Paul Davis, a former financial advisor, as he sold an elderly couple life insurance and variable annuities. Davis apparently sold the clients’ $3.8 million portfolio, which had been heavily invested in municipal bonds, and bought the annuities and life insurance products. At some point between 2002 and 2006, the broker exchanged one annuity for another, raising red flags.
The Tylers continued to work with Davis after he joined LPL Financial in 2006. That broker-dealer settled with Stoneman before the arbitration began.
Raymond James officials declined to comment for this article, deferring to the firm's filing for the challenge.
Stoneman stated that she also believes that in making the Florida argument,
Raymond James is violating Rule 3110. That four-part rule prohibits any conditions or restrictions in how the arbitration will proceed and awards made.