Raymond James says oopsie…

We all forget stuff from time to time. Just this morning, I was rushing out the door to make a 6:30 Pilates class only to realize that I had forgotten the garage clicker back upstairs. It was a minor inconvenience, to be sure, but not much more.

Now compare that to the amended 10-K that Raymond James Financial (RJF) filed yesterday for the fiscal year ended Sept. 30, 2009. In the explanatory note, the company says that it forgot about a loan that it made to one of its executives in August 2008. It’s not until you get to the body of the filing that you realize that the loan was for $1 million Canadian dollars, which seems like an awfully big oops. Here’s the disclosure from the filing:

RJ Ltd., our Canadian subsidiary, made a forgivable loan in August 2008, in the amount of CDN$1,000,000 to Paul D. Allison, pursuant to his offer letter to join RJ Ltd. as Co-President and Co-CEO. Forgivable loans are typical recruiting inducements in the Canadian securities industry. Under the terms of the loan, one third of the principal amount is forgiven each year if he remains an employee. This loan came to the attention of the Company’s general counsel in October 2010 who informed RJ Ltd. and Mr. Allison that since he became an executive officer of the Company, maintaining that loan is prohibited under Section 402 of Sarbanes Oxley Act of 2002. As a consequence, RJ Ltd. forgave the CDN$333,333.33 remaining balance of the loan in November 2010, seven-months prior to the last contractual forgiveness date.

What makes this disclosure particularly interesting is the timing. Allison was a former top executive with Merrill Lynch Canada. His timing for leaving Merrill — in August 2008 — couldn’t have been much better, given where Merrill wound up just a few months later. And yet he still needed the $1 million forgivable loan to make the leap to Raymond James? There’s also the timing about the disclosure: why did it take until Oct. 2010 for someone to realize that a mistake had been made by not disclosing this earlier?

Image source: Jean Ryder via DHD Multimedia Gallery


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