The Financial Industry Regulatory Authority has fined broker-dealer Stifel, Nicolaus & Company, and Stifel submitted a letter of acceptance, waiver, and consent for the purpose of proposing a settlement.
From at least April 2014 to February 2021, Stifel failed to establish, maintain, and enforce a supervisory system designed to comply with FINRA’s suitability rule pertaining to early rollovers of unit investment trusts. This led to Stifel’s inability to detect alleged misconduct. Broker A converted at least $105,000 from Customer A by writing six checks on her account that he made payable to himself or to a bank account that he controlled. As a result, Stifel violated NASD Rule 3010 and FINRA Rules 3110 and 2010.
Separately, from August 2017 to March 2019:
- Registered representative Broker B allegedly sold interests in a fictitious investment. The firm failed to reasonably respond to certain alerts that Broker B’s options trades were potentially unsuitable. The firm also regularly and unreasonably suppressed some alerts involving Broker B’s trading. Broker B recommended more than 100 speculative options trades in one of the brokerage accounts of Customer B, who was a 64-year-old retired schoolteacher with no options experience or knowledge. Most of the trades were short-term, out-of-the-money calls or puts, many of which expired worthless and caused Customer B’s account to lose nearly 80% of the funds deposited to the account in less than a year.
- Additionally, Broker B recommended speculative options trading in the brokerage account of Customer C; in 2019, this resulted in total losses of nearly $28,000.
- Finally, Broker B recommended to five of his customers purchases in a security that, although listed on an exchange at the time, was priced under $1 a share with a total market capitalization of less than $250 million. When Stifel noted that Broker B was purchasing a “collapsing equity,” Broker B continued to recommend purchases of the stock and ultimately, customers incurred realized losses of more than $53,000.
As a result of all of all of Broker B’s activities, Stifel violated FINRA Rules 3110(a) and 2010.
Without admitting or denying FINRA’s findings, Stifel consented to a censure, a $1.75 million fine, and an order of restitution in the Broker A matter. Regarding Broker B, Stifel consented to a censure, a $400,000 fine, and an order of restitution of $59,360.43.
Stifel has been a FINRA member since 1936. The firm is a full-service broker-dealer headquartered in St. Louis, Mo., with approximately 450 branch offices and 5,200 registered representatives.
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