Erez Law recently filed a FINRA arbitration against Raymond James & Associates, Inc. and financial advisor Clay Cale Rucker (CRD #1347169) regarding mismanagement of a customer account that resulted in significant damages. Rucker has been registered with Raymond James & Associates in Atlanta, Georgia since 1997.
The inexperienced and unknowledgeable customer alleges that he turned to Rucker to invest $14 million from the proceeds of the sale of his businesses. The Erez Law client was looking to retire and earn a modest income to meet his financial needs from his investments. It is alleged that Rucker recklessly mismanaged the customer’s account and betrayed his trust solely to maximize his commissions.
Rucker placed the customer’s life savings in a fee based account that charges 1% per year of the value of the account for the management of the customer’s portfolio. This type of account was marketed by Raymond James & Associates as having a compensation structure based on the value of the customer account and not based on the level of trading.
Erez Law alleges that Rucker engaged in a systematic and prolonged fraudulent scheme to charge excessive commissions and enrich himself while he blatantly breached his fiduciary duty as an investment advisor. According to the complaint, Rucker engaged in rampant trading of commissionable structured notes including proprietary Raymond James & Associates structured notes solely to generate commissions of approximately 2.75-3.5%. Structured notes were exempt from the fee-based account platform and were subject to commissions on each purchase. Rucker failed to adequately disclose this critical information to his former customer.
Structured notes are complex securities derived from or based on a single security or index, basket of securities or indices, a debt issuance, a commodity and/or a foreign currency. Most structured products pay an interest or coupon rate based on certain defined parameters. Structured products typically consist of a note and a derivative, most often an option. While the note pays interest, the derivative defines the payment at maturity. Despite the fact that structured products most often involve options, they are typically marketed as debt securities. Structured products can offer a form of principal protection and frequently cap the upside participation in the underlying investment. Additionally, structured products do not trade on an exchange and are generally not liquid investments. Given the complexity of these structured products and their similarities to options, securities regulators have required brokerage firms such as Raymond James & Associates, Inc. to specially approve clients for structured products.
Erez Law alleges that Rucker also engaged in unauthorized trading in relation to the structured notes. Rucker failed to obtain his former customer’s required prior authorization for each transaction. It is also alleged that Rucker also systematically engaged in self-dealing by buying securities in initial public offerings and secondary offerings underwritten by Raymond James & Associates in the customer’s account solely to generate maximum commissions. It is also alleged that Rucker failed to disclose the risks and characteristics of the investment to the customer.
Some of the structured notes that Rucker sold the customer were unsuitable. Rucker sold the Erez Law client investments in the high risk energy sector, including:
- RJ Oil Market Recovery Note
- LRR Energy LP
- Linn Energy LLC
- Jernigan Cap REIT
- Hi Crush Partners LP
- Memorial Production Partners LP
The complaint alleges that Rucker violated his fiduciary duty, engaged in unauthorized trading, committed fraud, sold unsuitable investments, and broke the explicit promises made by Raymond James & Associates, amongst other things. Rucker churned the customer’s account in that he managed the customer’s account for the purpose of generating commissions and in disregard of the customer’s best interests.
Erez Law has alleged on behalf of its clients that Rucker had de facto discretionary control over the customer’s account. As such, by exercising discretion to purchase shares in an initial or secondary offering underwritten by Raymond James & Associates, he allegedly violated the conflict of interest rules which prohibit this exact activity.
Erez Law represents investors in the United States for claims against Raymond James & Associates, Inc. and financial advisor Clay Cale Rucker, who is alleged to engage in unauthorized trading, fraud, recommend unsuitable investments, and churning in his customer’s account. If you were a client of Raymond James & Associates, Inc. and financial advisor Clay Cale Rucker, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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