A Market Regulation Services Inc. (RS) hearing panel has approved settlement agreements with Raymond James Ltd. and Marc Deslongchamps of Raymond James relating to client priority, order marking, audit trail and supervision issues.

Raymond James was fined $400,000 plus $125,000 in costs. Deslongchamps was fined $50,000 and is prohibited to act in a supervisory capacity for a period of 1 year.

In the period February 2003 to February 2005, trading by certain Raymond James traders, under the direction of Deslongchamps and including trading by Deslongchamps himself, resulted in numerous client priority, audit trail and order marking violations.

In the period July 2003 to February 2005, Raymond James’ institutional trading supervision and compliance system was not reasonably designed at any level to prevent and detect these violations. The manager of compliance at Raymond James used a flawed methodology to test for possible client priority issues. The flawed nature of the testing for client priority resulted in ongoing trade and audit trail problems not being escalated at Raymond James.

Raymond James took no effective steps to ensure that Deslongchamps carried out his trading supervision obligations, in relation to himself and the traders he oversaw, by obtaining and/or recording client consent to trade ahead or alongside clients and by fulfilling audit trail requirements.

Between February 2003 and February 2005, Deslongchamps failed to fulfill his supervisory responsibilities as the supervisor of institutional trading and proprietary trading. Deslongchamps took no effective steps to supervise the Raymond James traders to ensure compliance with client priority and audit trail requirements.

Deslongchamps’ trading or trading he oversaw resulted in the majority of the client priority and related violations.

As a result of RS’s investigation and the 2005 Trade Desk Review conducted by RS, Raymond James has advised that the methodology for reviewing trades for client priority and client consent issues is now more detailed. In addition, Raymond James has retained the services of an independent consultant to conduct a review of both its Policies & Procedures Manual and its supervisory and compliance practices in relation to its institutional trade desk.