Raymond James and Robert W. Baird Are Charged With Compliance Failures
The Securities and Exchange Commission said that Robert W. Baird and Co. and Raymond James & Associates (RJF) will pay $250K and $600K, respectively, to settle charges accusing them of compliance failures in their own wrap free programs. Both firms resolved the charges without admitting or denying to them. They did, however, consent to the regulator’s orders, which found that they violated the Investment Advisers Act of 1940 and Rule 206(4)-7.
According to the SEC’s investigation, Raymond James and Robert W. Baird did not put into place the necessary policies and procedures that would have allowed them to figure out how much in commissions their clients were charged when sub-advisers “traded away” with a brokerage firm that was not part of the wrap fee programs. As a result, said the regulator, the advisers could not let clients know the “magnitude of the costs” nor did the firm consider these commissions when trying to figure out whether the wrap fee program or sub-advisers were appropriate for clients. Because of this, claims the SEC, some clients did not know that they were paying for more than the single wrap fee for investments that were bundled.
Two ARCP Ex-Accounting Executives Face SEC and Criminal Charges For Allegedly Inflating the REIT’s Performance
Brian S. Block and Lisa P. McAlister are facing criminal and civil charges for allegedly overstating the performance of the American Reality Capital Properties (ARCP), now called VEREIT Inc. The two former ARCP accounting executives are accused of inflating a key metric that investors and analysts used to evaluate the publicly-traded real estate investment trust.
The SEC’s complaint said that Block, formerly ARCP’s CFO, and McAllister, the ex-chief accounting officer, sought to manipulate the way the REIT’s adjusted funds from operations (AFFO) were calculated. This is the non-GAAP measure employed when a company is seeking to provide guidance regarding earnings. When internal accounting staff cautioned that a method that was not correct was used to figure out AFFO in the REIT’s first quarter financial results from 2014, Block allegedly falsified the AFFO presentation before submitting ARCP’s second quarter results. McAlister was allegedly present when Block submitted the bogus numbers to hide the previous AFFO overstatement and make it look as if ARCP had satisfied estimates for the second quarter when that wasn’t the case.
The U.S. Attorney’s Office for the Southern District of New York has filed a criminal case against McAlister and Block.
RBC to Pay $2.5M for Materially False and Misleading Disclosures
RBC Capital Markets LLC will pay $2.5M to resolve an SEC case accusing the firm of causing materially false and misleading disclosures in its valuation analysis to be included in a proxy statement for the sale of Rural/Metro Corporation to a private equity firm. RBC was Rural Metro’s lead financial advisers and was paid $500K for a fairness opinion, which it gave to the medical transportation services provider’s board as they were pondering the sale.
According to the Commission, the presentation included statements that were materially false and misleading, which enhanced the bid’s appeal. The information then became part of the proxy statement filed by Rural/Metro in 2011 to gain shareholder approval for the sale.
To settle, RBC will pay a $2M penalty, $500K in disgorgement, plus almost $78K in interest.
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Read the SEC Order in the RBC Case (PDF)
Read the SEC Complaint Against the Former ARCP Executives (PDF)
Read the SEC Order in Case Against Baird (PDF)
Read the SEC Order in the Case Against Raymond James (PDF)