Stifel Nicolaus & Co. Regulatory Overview

The White Law Group reviews the regulatory history of Stifel Nicolaus & Co.  

Stifel Nicolaus & Co Inc. (CRD # 793), a broker-dealer and investment banking firm, is headquartered in St. Louis, Missouri. The firm reportedly has $148 billion in assets under management and 2,992 advisors. 

Stifel reportedly has 197 disclosure events on its broker record including 138 regulatory events, 2 civil events and 55 arbitrations, among others. 

FINRA and the Securities and Exchange Commission may impose regulatory actions against a broker-dealer such as censures, fines, suspensions and restitution, among others. Regulatory actions can have serious consequences for a broker-dealer’s profile and reputation.  The following is a review of Stifel Nicolaus & Co. and its history of regulatory actions.

Restitution to Customers: Non-traditional exchange-traded products (NT-ETPs)

On March 25, 2024, FINRA sanctioned Stifel, Nicolaus with a censure and $920,000 fine plus over $1 million in restitution to customers. During the relevant period, Stifel, Nicolaus,  failed to establish, maintain, and enforce supervisory systems, including written supervisory procedures (WSPs), designed to ensure compliance with suitability obligations regarding transactions involving non-traditional exchange-traded products (NT-ETPs).

NT-ETPs, such as leveraged and inverse ETPs, are complex instruments intended for short-term holding, typically one day or one month. Despite warnings from FINRA and NT-ETP prospectuses, Stifel failed to detect and address numerous unsuitable recommendations by their representatives, resulting in customer losses. This violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

More Sanctions for Failure to Supervise

March 18, 2024 – Stifel, Nicolaus & Company, Inc. has agreed to a settlement proposed by FINRA for alleged rule violations. The settlement, submitted through a Letter of Acceptance, Waiver, and Consent (AWC), includes findings by FINRA without admission or denial by Stifel.

The violations stem from Stifel’s alleged failure to establish and maintain a supervisory system to oversee the transmittal of customer funds by representatives with power of attorney over customer accounts. This failure resulted in a representative, referred to as Broker A, converting at least $105,000 from a customer’s account.

Stifel also allegedly failed to reasonably respond to red flags indicating potential misconduct by Broker B, who engaged in unsuitable recommendations involving options trading and a high-risk microcap security.

As part of the settlement, Stifel agrees to a censure, a $400,000 fine, and restitution totaling $59,360.43 plus interest to eligible customers affected by the misconduct. Stifel also consents to pay the monetary sanctions and restitution and waives certain procedural rights under FINRA’s Code of Procedure.

Stifel Pays $3.2 Million for Ignoring Red Flags

May 2023 – The Massachusetts state securities regulator censured Stifel, Nicolaus & Co. and ordered it to pay $3.2 million for neglecting red flags regarding a broker, Joseph Crespi, who allegedly overcharged elderly individuals, nonprofits, and churches. Crespi, Stifel’s sixth-largest producer in New England, engaged in predatory sales practices, including charging excessive fees and unauthorized transactions.

Stifel was allegedly aware of Crespi’s actions but allowed them to continue for over three years, according to FINRA. The sanctions include $700,000 in client restitution and potential additional restitution for customers charged commissions above 5% on equity transactions. T

he regulator also found wider supervisory lapses, such as employees, including Crespi’s branch manager, using personal cell phones for business communications. Crespi, no longer registered, has a history of unauthorized trades, according to FINRA.

Massachusetts Regulators sanctions Stifel Nicolaus for Rep’s Excessive Trading 

On May 1, 2023, Stifel Nicolaus & Co was reportedly ordered to pay a $2.5 million fine and $700,000 in customer restitution over alleged “predatory” sales practices by one of its former brokers, Joseph Crespi. Stifel agreed to pay in customer restitution to those clients who were charged more than 5% commissions on equity transactions. 

Stifel Nicolaus & Company allegedly ignored red flags that “elderly Massachusetts residents, non-profit organizations and churches were being charged excessive and unauthorized fees.”   

FINRA Hits Stifel with $3.6 million for sales of UITs 

May 2020 – FINRA fined Stifel $1,750,000; and ordered it to pay close to $1.9 million in restitution to about 1,700 customers for failing to supervise recommendations to roll over their UITs before they matured. FINRA says that the transactions were potentially unsuitable and allegedly caused the customers to incur sales charges they wouldn’t have had to pay had they held onto the investments for the full term. 

Between January 2012 through December 2016, Stifel purportedly executed about $10.9 billion in UIT transactions, of which about $935.2 million were rollovers occurring more than 100 days from their maturity date. FINRA alleges that Stifel also sent about 600 letters to customers purportedly misleading them about the costs of UIT rollovers, or “switches.” Those communications understated the cost of the switch by close to 49%, according to the Letter of Acceptance Waiver and Consent (AWC). 

FINRA Lawsuit: Stifel Client Alleged Unsuitable, Unauthorized, and Excessive trading 

February 2020 – A FINRA panel ordered Stifel Nicolaus to pay $500,000 in compensatory damages to a client after she filed a complaint alleging  unsuitable, unauthorized, and excessive trading. 

The customer reportedly claimed that her advisor, John Raymond Lisowski, while employed by Stifel, purportedly mishandled her account by failing to recommend and implement a suitable investment strategy or appropriate asset allocation, including allegedly over-concentrating her account in General Electric, Range Resources and U.S. Steel Corporation securities. 

The claim further alleged that Lisowski placed unauthorized option trades, engaged in excessive trading and invested her funds in unsuitable securities, reportedly causing her to incur substantial damages. 

The FINRA panel found that Stifel and Lisowski, who were both named as respondents in the customer’s action, were “jointly and severally liable” in the case.  

FINRA Lawsuits: Customer Complaints against Stifel Nicolaus

As of August 16, 2023, Advisor Hub has highlighted an escalating situation concerning numerous customer complaints filed in connection with a structured note strategy designed by a Stifel Nicolaus & Co. broker based in Miami. The complaints are surging, with another million-dollar claim recently added to the mix.

As stated in the broker’s CRD (Central Registration Depository), a total of nine arbitration cases have been initiated, with the most recent one being filed on July 21, 2023. The cumulative reported damages stand at a substantial $24.5 million, encompassing individual disputes spanning from $500,000 to $5 million.

These complaints, filed against Stifel as a respondent rather than the broker, allege negligence, breach of fiduciary duty, and unauthorized trading, as outlined in the article. The structured notes in question were significantly influenced by a volatile biotech index or frequently traded to generate commissions, as reported.

The focal point of contention is the broker’s alleged overconcentration of structured notes in specific stocks such as Dynatrace, Pinterest, and Snapchat. Additionally, the notes were reportedly linked to potentially unstable indexes, including the SPDR S&P Biotech ETF (NYSE: XBI), according to Advisor Hub’s report. When the stocks and biotech index experienced a significant downturn in late 2021, it caused investors to incur substantial losses, as detailed in the article. 

Claims Alleges High Risk Pharma and Biotech Investments

March 2021 – The White Law Group filed a FINRA claim against Stifel Nicolaus on behalf of a Linthicum, Maryland family. The claim alleged violation of common law fraud, breach of fiduciary duty, negligence, and negligent supervision.

The claim further alleges the firm unsuitably invested its clients in high-risk pharmaceutical and biotech investments, among others. 

It is further alleged that the financial advisor that was involved with the accounts at issue is Kenneth Blumberg (CRD#: 1585520). According to FINRA, Blumberg has been the broker of record for at least five customer disputes. Allegations include unsuitable investments, unauthorized trading, churning or excessive trading and professional negligence, misrepresentation, among others.  

The FINRA claim was seeking damages between $100,000.01 and $500,000. 

October 2019 – A FINRA arbitration panel ordered Stifel Nicolaus to pay $1.5 million to three Baltimore, MD customers who alleged the firm failed to properly supervise a broker who sold them biotechnology and healthcare stocks. 

The clients alleged that broker Kenneth D. Blumberg invested as much as 80% of their portfolio in fewer than 10 biotech stocks, according to an award issued on October 3, 2019. The investors originally requested $38 million in damages before making their final $1.5 million claim. According to the complaint, the account dropped $1.8 million between 2015 and 2017. 

Stifel Pays $2.7 Million to Settle SEC Charges 

September 2019 – Stifel agreed to pay $2.7 million to settle charges for providing incomplete and inaccurate securities trading information to the SEC. 

Broker-dealers are required to provide the information known as “blue sheet data,” which the SEC uses to carry out its enforcement and regulatory obligations, including investigations of insider trading and other fraudulent activity. 

The SEC found that Stifel failed to report data for approximately 9.8 million transactions and provided inaccurate information for approximately 1.4 million transactions. The firms admitted the findings in the SEC’s cease and desist order and agreed to be censured in addition to the $2.7 million penalty. 

Filing a FINRA Claim against Stifel Nicolaus & Co.

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees. 

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. 

If your broker has defrauded you, you may be able to file a FINRA claim against your brokerage firm. FINRA arbitration can be a complex and technical process, and having an experienced attorney who is knowledgeable about securities law can greatly increase your chances of success.              

Free Consultation – FINRA Attorneys 

The FINRA attorneys at the White Law Group can help you with the many aspects of the arbitration process including evaluating the merits of your claim and determining whether you have a strong case for arbitration.              

The White Law Group will draft the statement of claim and represent you at the arbitration hearing, present evidence and make arguments on your behalf. They may be able to negotiate a settlement for you before going to arbitration.   

If you have concerns regarding investments you purchased through Stifel Nicolaus & Co. and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510. 

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.