Raymond James is the latest firm to face legal action over its money laundering program. This week, two investors filed a lawsuit against the brokerage seeking class action, alleging that the Raymond James Bank Deposit Program benefited the company at the expense of customers.
Punta Gorda, Fla., resident Toni Conran filed a lawsuit in the Southern District of Florida seeking a class action against Raymond James, alleging that cash balances in her accounts were automatically transferred or “hidden” to a bank account with interest, the Raymond James Bank Deposit Program, similar to similar policies at many other firms that have become fodder for a series of lawsuits filed in recent weeks.
The lawsuit alleges that Raymond James' money laundering program offered “unreasonably low interest rates” and that the brokerage made more money when customers invested in those programs than in similar money options.
According to Conran, the interest rates paid to Raymond James customers on cash clearing deposits ranged from 0.25% to 3%, significantly lower than the current Federal Funds Rate target range of 5.25% to 5.5%. Meanwhile, the firm's combined net interest income and Raymond James Bank Deposit Program fees from third-party banks increased by $1.47 billion in 2023.
“They use their customers' money balances to generate massive profits for themselves while shortchanging their customers,” the lawsuit states.
The lawsuit also alleges that Raymond James failed to “reasonably disclose its conflict of interest in securing net interest income at the expense of its clients” and failed to recommend “a money laundering program that would pay a rate reasonable interest”.
Separately, Ohio residents Raymond and Juliet Schmidlin filed suit against the firm in the Middle District of Florida with similar allegations related to the money laundering program. Their lawsuit also alleges that they saw a “minimal return on their cash deposits” and that the firm hid the benefits they received by making inaccurate, misleading or skewed disclosures.
“RJA also failed to adequately, if at all, disclose to its clients that it was an agent serving two masters – those who were its clients on the one hand and its associated companies, including RJF, RJFS and RJ Bank, on the other hand,” the suit said.
Their lawsuit also alleges that Raymond James financial advisors profited from the money laundering program.
“As the Program Agreement states, clients 'should expect that Raymond James will share a portion of the proceeds it receives from one or more of the clearing options with your financial advisor,'” the lawsuit states.
A spokesman for Raymond James did not return a request for comment.
Raymond James is the latest in several firms to face money-laundering-related class-action lawsuits, including complaints filed against JP Morgan, UBS, LPL and Ameriprise in the last two weeks.
last month, Morgan Stanley revealed it was facing SEC investigations into its money laundering programs. Wells Fargo's most recent quarterly filings showed it was in “settlement discussions” with the commission about an investigation the firm first disclosed late last year.
Moody's has warned companies and other firms that ongoing investigations into money laundering programs could negatively impact their credit ratings by reducing revenue from uninvested customer money and increasing legal and regulatory costs.
In recent quarterly reports and earnings calls, UBS, Wells Fargo, Bank of America and Morgan Stanley said they were reevaluating their sweepstakes programs.