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Raymond James agrees to pay $600,000 penalty after probe into compliance failures

ST. PETERSBURG — Raymond James Financial has agreed to pay a $600,000 penalty for failing to disclose the entire cost of what their clients were being charged in commissions, the Securities and Exchange Commission said Thursday.

The St. Petersburg-based brokerage firm did not admit or deny the charges in accepting the penalty, the latest of several compliance violation inquiries involving the company.

A second firm identified by the SEC, Milwaukee-based Robert W. Baird & Co., agreed to pay a $250,000 penalty tied to related charges.

The news comes just four months after Raymond James paid a much larger settlement to another financial regulator challenging its business practices.

In May, the Financial Industry Regulatory Authority, or FINRA, levied a record $17 million fine against the company, accusing it of widespread failures in its efforts to prevent money laundering. That fine was the largest ever brought by FINRA against a single firm for violating money-laundering rules, though shy of the record $20 million fine FINRA levied against a financial firm for any violation.

Separately, Raymond James paid a $5.95 million fine to Vermont regulators in June over another charge of compliance violation. It faces further litigation in that case, which involves a failed $350 million ski resort and real estate project in northern Vermont tied to the firm's Miami branch.

The latest issue targeted by the SEC involves what clients paid beyond what's known as a "wrap fee" charged for bundled investment services.

Financial advisers for Raymond James and Baird weren't able to determine the magnitude of fees charged to their clients when subadvisers "traded away" with a broker-dealer outside their wrap fee programs, according to the SEC. Some clients were unaware of any charges beyond the single wrap fee, regulators said.

"Costs are a critical factor when firms determine whether a particular investment product or strategy is suitable for a client. Baird and Raymond James lacked policies and procedures to consider an entire category of cost information and didn't fully evaluate whether these wrap fee programs were a good fit for their clients," said Andrew J. Ceresney, director of the SEC's Division of Enforcement.

In a statement Thursday, Raymond James said it will be providing more disclosure information to clients starting in January.

"While Raymond James disclosed, in a manner reflecting what were understood to be industry practices, the potential for additional charges in wrap accounts related to securities transactions that are traded away, the firm has not historically collected the specific amount of equity commission costs resulting from these transactions, which are embedded in the security price reported for each purchase or sale," the statement read.

"We have updated agreements to gather detailed cost information from third-party managers and will begin reporting it to clients in January 2017."

Raymond James also indicated it has put in place more detailed disclosures to help clients better understand "the full spectrum of fees" that may apply to their managed accounts.

Contact Jeff Harrington at jharrington@tampabay.com. Follow @JeffMHarrington.

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