Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that broker-dealer Stifel, Nicolaus & Company, Incorporated (Stifel Nicolaus ) (CRD # 793) was recently sanctioned by FINRA’s Department of Enforcement. The sanction occurred as a result of an investigation into its failure to establish and maintain a supervisory system to comply with suitability rules as they pertain to early rollovers of Unit Investment Trusts (UIT’s). The Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Stifel Nicolaus.
Registration Background for Stifel Nicolaus
Stifel Nicolaus became a FINRA member in 1936. It is a full-service broker-dealer headquartered in St. Louis, MO. It currently has approximately 431 branch offices and 4,968 registered representatives.
FINRA’s Allegations against Stifel Nicolaus
FINRA’s investigation led to Stifel Nicolaus entering into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA on May 27, 2020. According to the AWC, Stifel Nicolaus consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:
- “From January 2012 through December 2016 (the “Relevant Period”), Stifel failed to establish and maintain a supervisory system, and failed to establish, maintain, and enforce written supervisory procedures (“WSPs”), that were reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to early rollovers of Unit Investment Trusts”;
- “During the Relevant Period, Stifel executed approximately $10.9 billion in UIT transactions that generated approximately $206.3 million in sales charges. The $10.9 billion in UIT transactions included approximately $935.2 million in proceeds from transactions in which UITs were sold more than 100 days before their maturity dates and some or all of the proceeds were used to purchase one or more new UITs (“early rollovers”)”;
- “Approximately $186.7 million of the proceeds were for transactions in which customers sold UITs more than 100 days prior to their maturity dates and used some or all of the proceeds to purchase a subsequent series of the same UIT, which…had, in many cases, the same or similar investment objectives and strategies as the prior series (“series-to-series early rollovers”)”;
- “Stifel’s WSPs recognized that “[s]witching from one UIT to another . . . before UIT maturity may subject the customer to incur a [new] sales charge”;
- “the WSPs referenced a “UIT Switch Letter,” which representatives could use “when a client [sold] a position in a UIT before maturity to purchase another UIT or mutual fund”;
- “According to the WSPs, the purpose of the switch letter was to confirm a customer’s “understanding of the transaction [switch] as well as the related risks and expenses”;
- “Nonetheless, the WSPs did not provide guidance about when switch letters should be sent or how Firm supervisors should monitor for potentially unsuitable patterns of early UIT rollovers”;
- “During the Relevant Period, Stifel sent more than 1,200 switch letters in connection with early UIT rollovers”;
- “The switch letters were intended to provide customers with necessary information about the switch transaction, and according to the Firm’s WSPs, confirm a customer’s “understanding of the transaction [switch] as well as the related risks and expenses”;
- “Customers were required to sign and return the letter to the Firm acknowledging the switch transaction. Nonetheless, the Firm did not verify the accuracy of the information contained in certain of the switch letters, apart from ad hoc reviews conducted as part of the Firm’s branch inspection program”;
- “Those reviews did not identify that approximately 639 of the 1,200 UIT switch letters sent by Stifel during the Relevant Period either contained inaccurate information regarding the costs incurred by customers in connection with the switch or failed to specify the costs”; and
- “By virtue the foregoing, Stifel violated NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on and after December 1, 2014), and FINRA Rule 2010.”
FINRA Sanctions Stifel Nicolaus
As a result of such violations and in addition to the above described findings and conclusions, FINRA’s May 27, 2020 AWC also indicates that Stifel, Nicolaus consented to the following sanction:
- A censure;
- A fine of $1,750,000; and
- Restitution in the amount of $1,891,188.13, plus interest.
Stifel Nicolaus has a History of Complaints
In addition to the findings of FINRA’s Department of Enforcement, FINRA BrokerCheck for Stifel Nicolaus (pages 280 – 311) reveals it has a history of customer complaints including but not necessarily limited to the following:
- On August 16, 2012 a customer initiated an arbitration against the firm alleging breach of fiduciary duty, churning, manipulation, misrepresentation, omission of facts, suitability, unauthorized trading, failure to supervise and negligence. The customer alleged damages in the amount of $10,000,000.00. The arbitration resulted in an award against Stifel Nicolaus on March 31, 2015, in the amount of $1,542,342.01.
- On October 3, 2012 a customer initiated an arbitration against the firm alleging misrepresentation, suitability, unauthorized trading and failure to supervise. The customer alleged damages in the amount of $88,276.85. The arbitration resulted in an award against Stifel Nicolaus on September 24, 2013, in the amount of $62,500.85.
- On February 1, 2013 a customer initiated an arbitration against the firm alleging misrepresentation, omission of facts, suitability and failure to supervise. The customer alleged damages in the amount of $33,589.69. The arbitration resulted in an award against Stifel Nicolaus on September 3, 2013, in the amount of $3,310.62.
- On November 5, 2013 a customer initiated an arbitration against the firm alleging misrepresentation, omission of facts and suitability. The customer alleged damages in the amount of $75,000.00. The arbitration resulted in an award against the firm in the amount of $143,470.10 on July 16, 2015.
- On January 9, 2015 a customer initiated an arbitration against the firm alleging breach of fiduciary duty, churning, misrepresentation, omission of facts, unauthorized trading, failure to supervise and negligence. The customer alleged damages in the amount of $400,000.01. The arbitration resulted in an award against Stifel Nicolaus on December 22, 2016, in the amount of $22,882.55.
- On January 6, 2016 a customer initiated an arbitration against the firm alleging breach of fiduciary duty, fraud, misrepresentation, omission of facts, suitability, unauthorized trading, violation of Blue Sky laws, breach of contract failure to supervise and negligence. The customer alleged damages in the amount of $75,000.00. The arbitration resulted in an award against Stifel Nicolaus on February 9, 2017, in the amount of $117,354.82.
If you or someone you know has or had a brokerage account with Stifel, Nicolaus & Company, Incorporated and have concerns regarding losses in your investments or possible sales practice violations including fraud, you may be entitled to recover lost funds. The Law Office of Kevin J. Deloatch, Esq. has an extensive securities law practice and over 30 years of experience on Wall Street. Call today at (646) 792-2156 for a free consultation. The time to file your claim may be limited so you should call today to avoid delay.
