A judge denied Raymond James’ request to scotch a lawsuit by a client that accuses the firm of marking up processing fees up to 10 times on certain accounts.
Raymond James argued the client's lawsuit was without merit under Florida law. But Judge William Dimitrouleas ruled there was sufficient evidence in the form of expert testimony to let the case move forward.
This was the firm’s second effort at keeping the case out of the courtroom since attempting to dismiss the lawsuit when it was originally filed in 2015.
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Client Jyll Brink, who is suing the firm for breach of contract and negligence, is also seeking class action status for her claims. The judge has set a hearing on the matter for Friday.
The lawsuit alleges that the firm overcharges, sometimes by up to 10 times, its “processing fees” in certain accounts, according to the lawsuit.
The St. Petersburg, Florida-based regional broker-dealer, in a response filed to the complaint, acknowledged the fees, but said the amount was reasonable. Additionally, the firm claimed that the client signed an agreement to pay the fee, and the amount, without complaint, assuming the risk of negligence. The firm asserts that Brink continued to incur the fees without complaint.
A spokeswoman at Raymond James did not respond to a request for further comment on the matter.
The fees were associated with passport accounts, which are self-directed accounts where individuals can select from a variety of investments, including stocks, bonds, real estate investment trusts and eligible mutual funds, among others, according to the Raymond James website. The accounts require a minimum investment of $25,000.
Customers of the passport accounts were required to sign a client agreement, which specified a flat fee per transaction “for transaction execution and clearing services,” according to the lawsuit. It cited that the fees were not for commissions, but “to defray the expenses incurred in facilitating the execution and clearing.”
Before Oct. 1, 2013, the fee ranged from $30 to $50, depending on the type of security involved in the transaction. After Oct. 1, the fee ranged from $9.95 to $30, according to the lawsuit.
However, the cost of executing and clearing trades was closer to $5, according to the lawsuit, leading Raymond James to make substantial profits off of markups.
According to the lawsuit, these upcharges violate FINRA Rule 2122 which requires all charges and fees be directly related to the expenses incurred in processing the transaction.
A lawyer representing Brink did not respond to a request for comment.
Upon the original filing of the lawsuit, Raymond James’ motion to dismiss the case was denied. Last week the judge determined that the case would fail if based solely on violation of a FINRA rule. Still, the matter deserved a hearing in that a broker-dealer has a duty to disclose fees and services while not misrepresenting the cost, according to the order denying the motion for summary judgment.
