WASHINGTON – A recent SEC civil fraud charge against a former broker with Raymond James Financial Services Inc. will not have an immediate impact on credit unions. The SEC has brought civil fraud charges against Raymond James, a registered broker-dealer and investment adviser based on the conduct of one of its former brokers. According to the SEC, in 1999 and 2000, Dennis Herula and others allegedly fraudulently solicited a number of investors to deposit approximately $44.5 million in a Raymond James brokerage account held in the name of Brite Business. Approximately $16.5 million of the investor funds raised – most of which were subsequently transferred to Herula’s wife’s brokerage account at Raymond James – were dissipated and never returned to investors, and Herula and his wife misappropriated approximately $8.7 million of those funds, the SEC said. “Were there any credit unions affected – the simple answer is no,” said John Dugan, SEC assistant district administrator. “The case against Raymond James is based on one person. He did not have any credit union customers and the money stolen was not credit union money.” Dugan said if Raymond James is ordered to pay back the money “there could be some effect on (its) business,” which could impact credit unions. The case should be decided over the next year, he added. The SEC said J. Stephen Putnam, Raymond James’ former president and CEO, and David Ullom, Herula’s former branch manager, “failed reasonably” to supervise Herula. The SEC also alleges that Herula, acting in his capacity as a Raymond James registered representative, used Raymond James’ facilities and letterhead to carry out the scheme. “Raymond James was aware at the highest levels that Herula was making misrepresentations to potential investors and yet failed to put a stop to Herula’s activities,” said Stephen Cutler, director of the SEC’s Division of Enforcement “Brokerage firms cannot turn a blind eye to the fraudulent activities of their employees and expect to avoid the consequences.” The Commission previously brought fraud charges against Herula and others in connection with the Brite Business scheme on April 1, 2002. A Rhode Island federal court froze Herula’s assets and subsequently granted the Commission’s request for a default judgment against Herula on Oct. 17, 2002. [email protected]

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