Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. RAYMOND JAMES FINANCIAL INC (720005) 10-Q published on May 09, 2019 at 4:28 pm
Reporting Period: Mar 30, 2019
We perform goodwill and indefinite-lived intangible asset impairment testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or indicate that the asset is impaired. We performed our latest annual impairment testing for our goodwill and indefinite-lived intangible asset as of our January 1, 2019 evaluation date, evaluating balances as of December 31, 2018. We performed a qualitative impairment assessment for each of our reporting units that had goodwill, as well as for our indefinite-lived intangible asset.
Our qualitative assessments consider macroeconomic indicators, such as trends in equity and fixed income markets, GDP, unemployment rates, interest rates, housing markets and trade policy. We also consider regulatory changes, reporting unit specific results, and changes in key personnel and strategy. Changes in these indicators, and our ability to respond to such changes, may trigger the need for impairment testing at a point other than our annual assessment date. Based upon the outcome of our qualitative assessments, no impairment was identified. No events have occurred since our assessments that would cause us to update this impairment testing.
Non-interest expenses increased $32 million, or 15%, reflecting increases in compensation-related expenses, professional fees and other expenses. Compensation-related expenses increased as a result of increased investment banking revenues. Professional fees increased largely due to new accounting guidance we adopted effective October 1, 2018, which changed the presentation of certain costs related to investment banking transactions from a net presentation to a gross presentation. The current year quarter included this change, with approximately $6 million of transaction-related expenses included in professional fees. See Notes 2 and 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information on the adoption of this new accounting guidance. Other expense for the quarter included losses related to a consolidated tax credit fund, nearly all of which were offset in noncontrolling interests.
Total brokerage revenues decreased $17 million, or 8%, with declines in both fixed income and equity brokerage revenues. The decline in fixed income brokerage revenues was primarily due to decreased activity related to a program in which our fixed income public finance operations commit to purchase various agency MBS backed by mortgages originated by state and local housing finance agencies through their lending programs. Equity brokerage revenues continue to be challenged due to the industry trend toward the separate payment for research and execution services and the shift from high to low-touch execution services.
On February 17, 2015, Jyll Brink (“Brink”) filed a putative class action complaint in the U.S. District Court for the Southern District of Florida (the “District Court”) under the caption Jyll Brink v. Raymond James & Associates, Inc. (the “Brink Complaint”). The Brink Complaint alleges that Brink, a former customer of RJ&A, was charged a fee in her Passport Investment Account, and that the fee included an unauthorized and undisclosed profit to RJ&A in violation of its customer agreement and applicable industry standards. The Passport Investment Account is a fee-based account in which clients pay asset-based advisory fees and certain processing fees for ongoing investment advice and monitoring of securities holdings. The Brink Complaint seeks, among other relief, damages in the amount of the difference between the actual cost of processing a trade, as alleged by Brink, and the fee charged by RJ&A. On October 19, 2018, the District Court certified a class of former and current customers of RJ&A who executed a Passport Agreement and were charged processing fees during the period between February 17, 2010 and February 17, 2015. On January 18, 2019, the U.S. Court of Appeals for the Eleventh Circuit (the “Appellate Court”) entered an order granting permission to RJ&A to appeal the District Court’s class certification order. On January 25, 2019, the District Court issued an order staying trial, calendar call and all remaining pretrial deadlines pending resolution of the appeal. On April 5, 2019, Brink and RJ&A agreed in principle to a settlement of the Brink Complaint. The parties are currently negotiating a Stipulation of Settlement. Both the District Court and the Appellate Court have been informed of the foregoing. The settlement amount was included in “Other payables” in our Condensed Consolidated Statement of Financial Condition as of March 31, 2019.