Raymond James is the newest agency going through authorized motion associated to its money sweep program. This week, two buyers filed fits in opposition to the brokerage searching for class actions, claiming the Raymond James Financial institution Deposit Program benefitted the corporate on the expense of consumers.
Punta Gorda, Fla., resident Toni Conran filed a swimsuit in Florida’s Southern District searching for class motion in opposition to Raymond James, alleging that money balances in her accounts had been mechanically transferred or “swept” into an interest-bearing checking account, Raymond James Financial institution Deposit Program, akin to comparable insurance policies at many different companies which have turn into fodder for a spate of lawsuits filed in current weeks.
The swimsuit alleges that Raymond James’ money sweep program supplied “unreasonably low rates of interest” and that the brokerage made extra money when purchasers invested in these packages than in comparable money choices.
In response to Conran, the rates of interest paid to Raymond James purchasers with money sweep deposits ranged from 0.25% to three%, significantly decrease than the present Federal Funds Price goal vary of 5.25% to five.5%. In the meantime, the agency’s mixed internet curiosity revenue and Raymond James Financial institution Deposit Program charges from third-party banks elevated by $1.47 billion in 2023.
“They use their purchasers’ money balances to generate huge earnings for themselves whereas shortchanging their purchasers,” the swimsuit mentioned.
The swimsuit additionally alleges that Raymond James didn’t “fairly disclose its battle of curiosity in securing elevated internet curiosity revenue on the expense of its purchasers” and didn’t advocate “a money sweep program that may pay an inexpensive charge of curiosity.”
Individually, Ohio residents Raymond and Juliet Schmidlin filed swimsuit in opposition to the agency in Florida’s Center District with comparable allegations associated to the money sweep program. Their swimsuit additionally claims they noticed a “minimal return on their money deposits” and that the agency hid the advantages they acquired by making inaccurate, deceptive, or indirect disclosures.
“RJA additionally didn’t adequately, if in any respect, confide in its prospects that it was an agent serving two masters – these being its prospects on one hand, and its affiliated firms, together with RJF, RJFS and RJ Financial institution, then again,” the swimsuit mentioned.
Their swimsuit additionally factors out that Raymond James monetary advisors revenue from the money sweep program.
“Because the Program Settlement states, prospects ‘ought to anticipate that Raymond James will share a portion of the revenues it receives from a number of of the sweep choices together with your monetary advisor,’” the swimsuit mentioned.
A spokesperson for Raymond James didn’t return a request for remark.
Raymond James is the newest in a number of companies to face money sweep-related class motion fits, together with complaints filed in opposition to J.P. Morgan, UBS, LPL and Ameriprise within the final couple of weeks.
Final month, Morgan Stanley revealed that it was going through SEC probes into its money sweep packages. Wells Fargo’s most up-to-date quarterly filings indicated that it was in “decision discussions” with the fee about an inquiry the agency first disclosed late final 12 months.
Moody’s has warned wirehouses and different companies that continued investigations into money sweep packages might negatively affect their credit score rankings by decreasing the income from purchasers’ uninvested money and boosting authorized and regulatory prices.
In current quarterly earnings studies and calls, UBS, Wells Fargo, Financial institution of America and Morgan Stanley mentioned they had been reassessing their sweep deposit packages.