The Securities and Exchange Commission filed civil charges against Raymond James Financial Services Inc. for fraud and failing to supervise a broker accused by the agency of bilking investors, the regulator today.

The SEC charges stem from a former Raymond James broker, Dennis Herula, who was charged with using the company’s offices and letterhead to carry out a US$44.5 million investment fraud.

The SEC alleges approximately US$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 US$8.7 million of those funds.

The SEC accused the firm, a subsidiary of Raymond Changes Financial Services Inc., and its top officers of being aware of Herula’s misrepresentations but failing to put a stop to them.

As part of the case, the SEC’s enforcement staff also filed civil charges against Raymond James’s former president and branch manager for failing to supervise Herula.

“Brokerage firms cannot turn a blind eye to the fraudulent activities of their employees and expect to avoid the consequences,” said Stephen Cutler, director of the SEC’s division of enforcement, in a release.

The commission reports that it 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.