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Raymond James Agrees to ARS Settlement

Broker/dealer Raymond James Financial has agreed to pay a $1.7 million fine and buy back $300 million in auction-rate securities from clients as part of a settlement with eight states and the Securities and Exchange Commission (SEC).

Broker/dealers have been dealing with the auction-rate securities debacle since February 2008, when the market froze for the products came to a standstill. As a result, thousands of individual and institutional investors were left holding illiquid investments.

In August 2008, Raymond James announced that it was the subject of several investigations by state securities regulators over the auction-rate securities its registered reps had sold to clients.

As reported June 29 by Investment News, the states leading the charges against Raymond James’ settlement are Florida and Texas. Other states involved include Indiana, Missouri, New York, North Carolina, Pennsylvania and South Carolina.

Like many broker/dealers, Raymond James’ registered representatives and financial advisers allegedly characterized auction-rate securities as “cash equivalents” and “highly liquid” short-term investments to customers. In reality, the supposedly “cash-like products” became illiquid investments after the Wall Street firms that once supported the auction-rate market pulled out entirely.

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