The Securities and Exchange Commission has ordered Raymond James to pay $500,000 for failing to supervise a broker and ensure a system set up to combat the exploitation of senior citizens worked as intended.
In late 2017, the company formed the Senior-and-at-Risk-Clients group, tasking it with responding “primarily to potential external threats of financial exploitation” of older clients, according to an administrative proceeding document published by the SEC last week.
In June 2018, supervisors flagged Franklin, Tennessee-based advisor Frederick Stow’s management of an elderly client’s accounts to the internal SARC, but the group “declined to take action,” the SEC said.
The supervisors, meanwhile, didn’t further investigate the concerns because of poor communications from the firm about the scope of the SARC’s investigation and subsequent steps, according to the document.
Stow ended up misappropriating an additional $148,000 before May 2019, when he confessed to his scheme, the SEC says.
In all, Stow inappropriately steered $901,500 from two elderly customers' accounts between October 2015 and April 2019, according to the regulator.
Raymond James discharged Stow in May 2019 for allegations of “misappropriating funds from customer accounts,” according to his BrokerCheck record. Soon thereafter, in July 2019, the SEC barred Stow from the industry, and it later charged him with defrauding the elderly customers.
The SEC alleges that Raymond James failed to develop adequate policies and procedures to properly communicate to supervisors and compliance staff about the SARC’s process or the scope of the group’s work in supporting supervisors.
Last week, Raymond James consented to pay $500,000 without admitting or denying the findings, according to the document. A Raymond James spokesperson declined to provide a comment to Financial Advisor IQ Monday.
In October 2019, the Financial Industry Regulatory Authority barred Stow for failing to respond to requests for information, according to his record.