MANHATTAN (CN) - Raymond James Financial repeatedly underplayed its exposure to subprime mortgage-backed instruments and other bad deals, costing shareholders $2 billion and when the truth came out and the stock crashed in April this year, according to a federal class action.
Plaintiffs say the stock crash came after Raymond James announced in April that it would have to triple its loan loss reserves from the previous quarter. The announcement sent the share price to $16.49. Plaintiffs say Raymond James had goosed its share price to $27.56 in early 2008 by falsely claiming that, unlike so many others, the company was not heavily exposed to the subprime lending fiasco.
The allegations involve Raymond James' operation of its wholly owned subsidiary, Raymond James Bank, FSB, which provided residential, consumer and commercial loans and FDIC-insured deposit accounts.
Plaintiffs are represented by Nadeem Faruqi.
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