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Raymond James Auction-Rate Losing Streak Continues

Posted by Larry Doyle on September 9, 2010 6:20 AM |

Oh, to be a fly on the wall at Raymond James.

I can only imagine the wailing and gnashing of teeth by Raymond James managers as the firm loses another auction-rate securities ruling. Do you think Ray Jay’s managers are privately cursing out their own legal teams and the judges handing down some recent rulings against the firm? Major developments are breaking in the world of auction-rate securities, and the actions center on Raymond James. Let’s revisit a story I highlighted in late August.

At that time, I wrote Raymond James Taking Center Stage in ARS Tragedy:

Although the entire financial industry would clearly hope it could wake up from the nightmare known as auction-rate securities, the fact is this ongoing saga is no bad dream but a very real tragedy. Which player seems to be taking center stage in this ongoing epic disaster? Enter stage right, Raymond James.

A month ago, we witnessed in a WSJ review, Raymond James Ordered to Buy Back Auction-Rate Securities:

An arbitration panel ordered two units of Raymond James Financial Inc. to buy back $2.5 million in auction-rate securities from an investor.

Aside from the award, the most interesting element of this ‘act’ is the fact that:

Raymond James was still advising him to buy auction-rate securities into February 2008, when the auction market froze, and made one purchase the day after that occurred, Mr. Merdinger alleged. The market for auction-rate securities remains frozen, leaving many investors stranded.

Copies of emails that were considered during the proceeding allegedly showed that Raymond James financial managers knew there were problems in the auction-rate market well before it failed, according to Lawrence Byrne, a securities lawyer in Chicago who represented the investor.

Smoking gun perhaps? What exactly are in those e-mails? Think a whole host of other auction-rate securities holders might like to know? You think? Did those e-mails play a role in another Raymond James led auction-rate performance? When the curtain rose yesterday, the WSJ “reviewed” a similar play but with a twist entitled, Raymond James Forced to Buy Back Securities:

Raymond James & Associates Inc. and one of its brokers must buy back $925,000 in auction-rate securities from a Texas-based couple, a securities arbitration panel has ruled.

Were these individual cases truly nothing more than off-Broadway one act plays setting the stage for a Broadway blockbuster presentation?

Well, stay tuned as it appears that the smaller productions have, in fact, laid the groundwork for a potential major hit. How so? Can you say class-action? Thank you to a regular reader of Sense on Cents for sharing a Bloomberg BusinessWeek story, Raymond James Auction-Rate Lawsuit Is First to Be Upheld:

Raymond James & Associates must face a lawsuit claiming it defrauded buyers of auction-rate securities, the first class-action complaint over the instruments to be upheld in the wake of the market’s collapse.

At least 19 underwriters and broker-dealers were sued in class-action, or group, suits since the $330 billion market for auction-rate securities cratered in February 2008. At least eight financial firms, including Citigroup Inc. and Deutsche Bank AG, got complaints tossed when judges ruled they didn’t meet pleading requirements. In some cases, the investors were allowed to refile complaints with more detail.

U.S. District Judge Lewis A. Kaplan in New York upheld part of the complaint against the unit of St. Petersburg, Florida- based regional brokerage Raymond James Financial Inc., allowing the case to move to the discovery, or evidence-gathering, stage.

“A trier of fact would be entitled to find that it would have been important to a reasonable investor, in deciding whether to buy or sell ARS, that the ARS — supposedly liquid investments — were liquid only because auction brokers routinely intervened in the auctions to ensure their success,” Kaplan wrote in his Sept. 2 opinion. “RJA was under a duty to disclose this information.”

Kaplan tossed an earlier complaint in the case.

Was Raymond James doing anything differently than any other bank or money manager? Not from stories and reviews that I have seen. That said, two wrongs never make a right. Raymond James and every other entity engaged in the marketing and distribution of auction-rate securities should be compelled to offer sworn testimony in the process of providing full disclosures and total transparency. America needs more judges who will make that call, pursue the total truth, and allow justice to be served. Transparency and disclosures are the great truth serums. Raymond James specifically and Wall Street at large need to appreciate that.

Larry Doyle

Related Sense on Cents Commentary
Sense on Cents/Raymond James
Sense on Cents/Auction-Rate Securities

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • ARS Investor

    Class action lawsuit?

    Where does one sign up? Please anybody who has that information, share it as I am sure there are many who would appreciate it.

    LD, thanks for continuing to highlight these developments at Sense on Cents.

    • phil trupp

      You may wish to contact Girard Gibbs, LLC in San Francisco. They have an ongoing class action against RJ.

      • Susie

        I spoke with Girard Gibbs today – very disappointing. Class action only includes investors who purchased their ARS after 11/07 through Raymond James Financial Services, not Raymond James Assoc. In 10/07, I sold a business and had $ to invest for a short time pending a real estate investment. I suggested treasuries, my broker talked me into ARS. You know the rest… What I don’t get is if I was seeking liquidity and security, and the broker had info that the liquidity was drying up one month later – how can a judge not expect the fiduciary to inform me of the changing market. This whole thing is disgusting.

      • Ray Wahl

        Dear Phil,

        Just read your book this week. Great job! And thanks for not just taking your money and leaving everyone else behind.

        Blessings and Merry Christmas.

    • John W


      Rachel E. Schwartz
      Stueve Siegel Hanson LLP
      460 Nichols Road, Suite 200
      Kansas City, MO 64112
      816.714.7101 fax

      Visit us on the web at <>

      • John W

        Rachel E. Schwartz
        Stueve Siegel Hanson LLP
        460 Nichols Road, Suite 200
        Kansas City, MO 64112
        816.714.7101 fax

        Visit us


  • phil trupp

    Ray Jay is the object of current court actions. But let’s not forget some of the other players. Oppenheimer(OPY), for example.

    More than six months ago, OPY came to an ARS “settlement” with New York Attorney General Andrew Cuomo. The company was forced to redeem some of the nearly $1 billion in ARS it sold to clients as completely safe, liquid cash. This claim has long ago been viewed by regulators as “deceptive.”

    At the time of the settlement, OPY was crying poverty, and Cuomo apparently agreed to give the company leeway. He said there would be a six month review of the firm’s financial condition. In the meantime, the company has expanded and opened new offices in the U.S., and Asia. It has made expensive new hires. It has upped its quarterly dividend. It crowed in press releases that it enjoyed a splendid second quarter and proceeded to air expensive TV ads. Given all this success, why hasn’t Mr. Cuomo followed through? We have heard nothing from him in over six months. Do his political ambitions to become governor trump his obligation to OPY investors? Cuomo’s office has maintained a stony silence at the expense of those who were ripped off.

    And OPY is hardly alone among holdouts. E*Trade refuses to redeem its share of auction rate paper. Charles Schwab is another holdout. A number of closed-end funds refuse to make their ARS investors whole. Among the CEFs, only Nuveen is doing the right thing.

    Not long ago, Daisy Maxey of the Dow Jone Newswire reported that funds were still clinging to $26 billion in unredeemed ARS. But the total that remains unchallenged is much higher. It is estimated that at least $120 billion worth of auction rate paper remains frozen.

    Apparently the holdouts are determined to cling to their unscrupulous gains until an entire generation of ARS investors simply gives up the fight. If this is the strategy, it serves only to deepen the scandal and add to the general lack of trust which now clings to the industry like a noxious odor.

    Until all ARS investors are redeemed, the holdouts can expect more resistance, more legal fees, and an ever increasing loss of clients. It’s time for these obstinate companies to grow up and act like responsible, honest adults.

    • John W

      APPLAUSE TO PHIL TRUPP, Order his book “Ruthless” at AMAZON

      WE ALL HAVE TO SUPPORT THIS MAN, HE AMONG and LD ARE our HEROS!!! and some of the other rare brave souls to stand up to these pond scum

      MAYBE THE COLORADO AG OFFICE on the list of heros they the only state brave enough with any clout to help us get the word out!

      some others as well, but these come to my mind.

      • phil trupp

        Thank you, John W, for your gracious compliment. We are in this fight to the end. Starting in mid-October I’ll be on tour promoting the cause. The ARS scam is one of historic proportions–and historic cynicism. We can never let it happen again. As to Larry Doyle: his fierce honesty and integrity are gifts to all investors. The financial industry needs to know that cons–and the mechanisms of conning–are under attack at every level. Without transparency there will be no peace and no place to hide.

  • Mike Barry

    Oppenherimer & co is the worst of the worst. Wrosde than Ray Jamnes. The lies and implied threats to clients are Mafioso-like. Someday the truth will come out vs. Oppenheimer & co. Please, please, please, do not give this company any of your money I beg of you. There are numerous other firms that will do their best to protect your money, and charge the same fees at Oppenheimer. Go with one of them.

  • Oppenheimer Sucker

    It’s amazing that every company that sold ARS used the same sales pitch, almost word for word. The idea that the RJ’s and the Oppenheimers did not know that their was trouble in the ARS market has long since been proven not to be so. Oppenheimer’s CEO, other top executives and the head of their ARS trading desk all dumped their shares during the weeks before the market collapsed. Why then is each individual ARS victim left on their own to seek a solution when ARS were misrepresented to them in the exact same manner? All were treated the same yet some get their money back and some don’t. Also the remaining hold out companies withheld information from their clients that they themselves used to sell their own shares while leaving their clients in the blind which eventually lead to their money being frozen. Is their nothing wrong with this behavior? Cuomo apparently found this to be OK.
    I am tired of being screwed. Screwed by Oppenheimer & co, screwed by Cuomo and screwed by the closed end funds that use our cheap money to guarantee themselves profits. Also screwed by the do nothing regulators like the SEC and FINRA who have worked real hard to minimize the losses to the industry at the consumers expense.

    • phil trupp

      The complicity of the SEC and FINRA has been detailed in numerous postings by Larry Doyle, one of the most informed and powerful voices covering the ARS scandal. Everyone in a position to be heard has come to Larry’s side in revolt, not only against the ARS fraudsters, but against the do-nothing regulators. And I’m speaking now of those attorneys general who have sat on their hands and done nothing to help victims regain their investments, which as of this date exceeds $120 billion. AGs in TX, GA, FL, LA, ID, NB, VT, KN, WI…and so many others…when will you do your job for the citizens who pay your salaries? Will you remain comatose? Are you in the pockets of the worst Wall Street thugs since the Great Depression?

      And “Oppenheimer Sucker”: I’d drop that last descriptive pronoun if I were you. If you’re a “sucker” so are dozens of major corporations and municipalities still suck with frozen auction rate paper. Wall Street is an equal opportunity predator. I got smacked, too. But with the help of others caught in the ARS scandal I was redeemed 100%. So please don’t give up. Somewhere in all this muck there is a chance for justice, if you’re willing to fight for it.

  • John W

    AGs in TX, GA, FL, LA, ID, NB, VT, KN, WI


  • Bill

    If every con artist involved in the auction rate securities fraud were locked up, a new Leavenworth would have to be constructed.

  • Liz

    Some potential good news re: future Blackrock ARPS redemptions…

    The recent demand letters that several funds received from their common shareholders demanding that funds “not” redeem ARPS and requesting penalties be imposed on the funds for past redemptions at par have lost the battle with Blackrock. The committee making the final assessment in regard to Blackrock funds has determined, per the above article, that the demand letters are unfounded. Blackrock can now redeem ARPS if they choose to. The committee evaluating similar demand letters sent to Van Kampen/Invesco has not made a final determination yet.

  • Liz

    Per the above article, Invesco/Van Kampen funds have not yet resolved the demand letter lawsuits from their common shareholders requesting that ARPs not be redeemed. The lawsuit is still being evaluated. Hopefully, the outcome will be the same as Blackrock and Nuveen where these claims are deemed unwarranted. Of course, even if that is the outcome, there is no assurance that Van Kampen will have further redemptions but I hope that it will encourage the funds to bring this nightmare to an end.

  • Monika McCaffrey

    Could anhyone tell me if there are any legal actions against Advent Claymore for their Auction Rate Convertible Securities – which have also not been liquid for 3 years now? I have money in these, and it is getting totally old to not have access to this investment…. And whenever I call the company, I have been getting all these same excuses and explanation for the last 3 years, however certainly not my money!

  • John W

    I am another victim, file a complaint with the SEC. I will post later the contact name of a person at the SEC who is investigating Advent Claymore. Numerous complainst on them.

    The crooked brokers aside, Advent Claymore is one of the most corrupt, intransigent, unresponsive Closed End Funds, and is refusing to make their own ARS crap liquid. They have even re-incorporated overseas to try to avoid redemption.

    Send your complaint to a Mr. Krover in an Illinois Claymore office. I’ll post his address later too.

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