Stifel Financial Ordered to Pay $3.2M Over Broker Joseph Crespi’s “Predatory Sales Practices” Towards Elderly Investors

STIFEL Financial

Recently, Stifel, Nicolaus & Co., referred to as Stifel Financial, was fined $3.2 million by the Massachusetts state securities regulator for ignoring red flags about a broker, Joseph Crespi, who was allegedly engaged in “predatory sales practices” towards elderly investors. The regulator also censured the company for public and ordered it to pay restitution to the affected customers.

Stifel Financial Corp is a full-service brokerage and investment banking firm with over 390 offices across 45 states in the United States. The firm provides securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, individuals, and companies and municipalities.

According to the regulator’s investigation, Crespi generated over $1.4 million in commissions from elderly customers, many of whom suffered significant losses as a result of his actions. Crespi allegedly made unsuitable recommendations, engaged in excessive trading to generate commissions, and made unauthorized transactions, forgery, and churning.

This is not the first time Stifel, Nicolaus & Co. has faced regulatory actions and complaints from customers. In 2020, the Financial Industry Regulatory Authority (FINRA) sanctioned the company over $3.6 million for violations involving Unit Investment Trusts products. The company has also faced dozens of arbitration awards over customer complaints, including 2012 cease and desist order relating to the mishandling of the sale of auction-rate securities (ARS) to clients.

If you or someone you know has suffered losses due to Stifel Financial Corp, or Joseph Crespi’s alleged misconduct, you may recover your losses through legal action. Haselkorn & Thibaut, P.A. is a leading investment fraud law firm with offices in several states and a 98% success rate in recovering investment losses for our clients. Contact us for a free consultation at 1-800-856-3352.

FINRA Actions Involving Stifel Financial

Stifel, Nicolaus & Company, Incorporated (NYSE: SF) is a full-service brokerage and investment banking firm that provides securities brokerage, ib, trading, investment advisory, and other financial services to individual investors, professional money managers, businesses, and public and municipalities. It is a broker-dealer registered with the SEC since 1936 and an investment adviser registered with the SEC since May 7, 1975. Stifel is owned by Stifel Financial Corp., a publicly held company whose common stock trades under the symbol “SF”.

According to BrokerCheck, it has over 100 disclosures. BrokerCheck is a trusted tool provided by the Financial Industry Regulatory Authority (FINRA) to help investors research the professional backgrounds of brokers and investment advisers, including any disclosures, client complaints, or other regulatory actions. Stifel, Nicolaus & Company’s BrokerCheck summary can be found on the FINRA website under CRD#: 793. This summary provides information on Stifel’s regulatory history and any customer complaints, regulatory actions, or other public disclosures related to its relationships with brokers and investment advisers.

Individual brokers and investment advisers associated with Stifel, Nicolaus & Company also have their own BrokerCheck summaries, the content of which can include disclosures, customer complaints, and regulatory actions. For example, Joel David Davidman, a broker and investment adviser with Stifel, has a BrokerCheck summary with CRD#: 861180. Another example is Scott Fergang, who has been registered as a broker and investment adviser with Stifel since 2019, and that time he has three disclosures on his BrokerCheck report.

It is essential for investors to review the BrokerCheck disclosures of any firm or individual or advisor they are considering working with to ensure they make informed decisions about their investments and to be aware of any potential issues or conflicts of interest.

Complaints Against Stifel, Nicolaus & Co.

Role of the Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization responsible for overseeing brokerage firms and other companies and their registered representatives in the United States. It aims to provide and to protect investors by ensuring that brokerage firms and their employees comply with federal securities laws, rules, and regulations, FINRA rules, and the Municipal Securities Rulemaking Board.

Overview of FINRA actions against Stifel Financial Corp

Stifel, Nicolaus & Co. has faced a number of various regulatory fines and sanctions by FINRA in recent years. In May 2020, FINRA fined the firm $1.75 million and ordered it to pay close to $1.9 million in restitution to approximately 1,700 customers for failing to supervise recommendations to roll over their Unit Investment Trusts (UITs) before they matured. According to FINRA, these transactions used potentially unsuitable assets and caused customers to incur sales charges they wouldn’t have otherwise faced.

In September 2019, Stifel agreed to pay $2.7 million to settle charges for providing incomplete and inaccurate securities trading information to the SEC. The information, known as “blue sheet data,” is used by the SEC to carry out its enforcement and regulatory obligations, including investigations of insider trading.

stifel financial finra complaints

Recent Examples of Complaints

In one case last year, Stifel broker Brian Engstrom was suspended for three months and fined $5,000 for allegedly encouraging clients to excessively trade unit investment trusts (UITs). In another instance, a cease and desist order was filed against Stifel for mishandling the sale of auction-rate securities (ARS) to clients between 2006 and 2008.

Stifel has a large number of complaints in the BrokerCheck Record. In fact, there are over 197 disclosures. To be fair, some are close and settle in arbitration. Here are some of the most recent ones:

Disclosure 1:

  • Reporting Source: Regulator Final
  • Allegations: Stifel failed to supervise its agents in various ways, including not reasonably supervising trading in customer accounts, not reasonably monitoring use of off-channel electronic devices by agents to conduct business, and not reasonably reviewing and approving retail communications prior to distribution.
  • Initiated By: Massachusetts
  • Date Initiated: 04/28/2023
  • Docket/Case Number: E-2022-0052; E-2023-0004
  • URL for Regulatory Action: Link
  • Principal Product Type: Equity Listed (Common & Preferred Stock)
  • Principal Sanction(s)/Relief Sought: Civil and Administrative Penalties/Fines
  • Other Sanction(s)/Relief Sought: Restitution; Censure; Cease and Desist; and Undertakings.
  • Resolution: Consent
  • Resolution Date: 04/28/2023
  • Sanctions Ordered: Censure, Monetary/Fine $2,500,000.00, Disgorgement/Restitution, Cease and Desist/Injunction
  • Other Sanctions Ordered: In addition to the administrative fine, restitution payments to certain customers in an amount of no less than $712,612.58 and comprehensive review of written supervisory policies and procedures related to brokerage sales practices. Ordered 40 hours of continuing education for certain Stifel employees regarding supervisory duties.

Disclosure 2:

  • Reporting Source: Regulator Final
  • Allegations: The firm failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial risks of its market access business activity.
  • Initiated By: NASDAQ Stock Market
  • Date Initiated: 06/14/2022
  • Docket/Case Number: 2015045823202
  • Principal Product Type: Other
  • Principal Sanction(s)/Relief Sought: Acceptance, Waiver & Consent (AWC)
  • Resolution Date: 06/14/2022
  • Sanctions Ordered: Censure, Monetary/Fine $62,500.00
  • Other Sanctions Ordered: The firm was censured and fined a total of $125,000, of which $62,500 is payable to NASDAQ. The remainder of the fine shall be paid to New York Stock Exchange LLC.

Disclosure 3:

  • Reporting Source: Regulator Final
  • Allegations: Similar to Disclosure 2.
  • Initiated By: New York Stock Exchange
  • Date Initiated: 06/13/2022
  • Docket/Case Number: 2015045823201
  • Principal Product Type: Other
  • Principal Sanction(s)/Relief Sought: Acceptance, Waiver & Consent (AWC)
  • Resolution Date: 06/13/2022
  • Sanctions Ordered: Censure, Monetary/Fine $62,500.00
  • Other Sanctions Ordered: The firm was censured and fined a total of $125,000, of which $62,500 is payable to NYSE. The balance of the fine will be paid to NASDAQ.

Disclosure 4:

  • Reporting Source: Firm Final
  • Allegations: The firm failed to properly supervise a registered representative who had a client heavily concentrated in the precious metal sector.
  • Initiated By: Commonwealth of Massachusetts
  • Date Initiated: 03/31/2021
  • Docket/Case Number: E-2019-0005
  • Principal Product Type: Mutual Fund(s)
  • Resolution: Consent
  • Resolution Date:03/31/2021
  • Sanctions Ordered: Censure, Monetary/Fine $233,907.84, Disgorgement/Restitution, Cease and Desist/Injunction
  • Other Sanctions Ordered: The firm will pay a fine of $100,000.00 and reimburse one of the registered rep’s former clients in the amount of $133,907.84.

Disclosure 5:

  • Reporting Source: Regulator Final
  • Allegations: The firm failed to establish, maintain, and enforce policies and procedures reasonably designed to prevent the potential misuse of material nonpublic customer order information concerning the repurchase of shares by issuers.
  • Initiated By: New York Stock Exchange
  • Date Initiated: 02/08/2021
  • Docket/Case Number: 2020-02-00064, 2020-02-00065
  • Principal Product Type: No Product
  • Resolution: Acceptance, Waiver & Consent (AWC)
  • Resolution Date: 02/08/2021
  • Sanctions Ordered: Censure, Monetary/Fine $325,000.00, Undertaking
  • Other Sanctions Ordered: The firm was censured, fined $325,000, and required to certify that it has completed the remediation of the issues addressed in the AWC.

Disclosure 6:

  • Reporting Source: Firm Final
  • Allegations: During the period April 1, 2018 through September 30, 2020, Stifel failed to maintain and enforce written policies and procedures reasonably designed to prevent the potential misuse of material, nonpublic information and to supervise and enforce reasonable information barriers in connection with their stock buyback trading activity.
  • Initiated By: New York Stock Exchange LLC
  • Date Initiated: 02/08/2021
  • Docket/Case Number: 2020-02-00065
  • Principal Product Type: No Product
  • Resolution: Acceptance, Waiver & Consent (AWC)
  • Resolution Date: 02/08/2021
  • Sanctions Ordered: Censure, Monetary/Fine $325,000.00, Certification of Remediation
  • Other Sanctions Ordered: $325,000 fine paid on 2/22/2021.

Disclosure 7:

  • Reporting Source: FINRA
  • Date Initiated: 09/01/2020
  • Docket/Case Number: 2018057286802
  • Principal Product Type: Not specified
  • Allegations: The firm lacked a supervisory system, including Written Supervisory Procedures (WSPs), reasonably designed to detect and prevent the firm and its registered representatives from executing pre-arranged transactions.
  • Resolution: Acceptance, Waiver & Consent (AWC) on 09/01/2020
  • Sanctions: The firm was censured and fined $40,000, which was paid in full on September 28, 2020.

Disclosure 8:

  • Reporting Source: FINRA
  • Date Initiated: 05/28/2020
  • Docket/Case Number: 2016050948201
  • Principal Product Type: Unit Investment Trust(s)
  • Allegations: The firm failed to establish and maintain a supervisory system, and failed to establish, maintain, and enforce WSPs, that were reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to early rollovers of Unit Investment Trusts (UIT).
  • Resolution: Acceptance, Waiver & Consent (AWC) on 05/28/2020
  • Sanctions: The firm was censured, fined $1,750,000, and ordered to pay $1,891,188.13, plus interest, in restitution to customers. The fines were paid in full on July 24, 2020.

Disclosure 9:

  • Reporting Source: Massachusetts
  • Date Initiated: 12/19/2018
  • Docket/Case Number: 2018-0013
  • Principal Product Type: Not specified
  • Allegations: Stifel failed to supervise an agent who directed an investment adviser to place trades in the adviser’s client accounts in order to generate commission to the detriment of Stifel customers. Stifel also failed to supervise the agent’s books and records.
  • Resolution: Order on 12/19/2018
  • Sanctions: The firm was censured, ordered to cease and desist, review supervisory policies and procedures, review certain trades, provide restitution, and pay an administrative fine of $300,000.

Disclosure 10:

  • Reporting Source: United States Securities and Exchange Commission
  • Date Initiated: 09/16/2019
  • Docket/Case Number: 3-19458
  • Principal Product Type: Not specified
  • Allegations: Stifel failed to submit complete and accurate data in response to the SEC’s Electronic Blue Sheets (EBS) requests, resulting in the reporting of EBS that was incomplete or deficient.
  • Resolution: Order on 09/16/2019
  • Sanctions: The firm was censured, ordered to cease and desist, and pay a civil monetary penalty of $2,700,000.

Disclosure 11:

  • Reporting Source: United States Securities and Exchange Commission
  • Date Initiated: 03/11/2019
  • Docket/Case Number: 40-5189
  • Principal Product Type: Not specified
  • Allegations: Breaches of fiduciary duty and inadequate disclosures by the respondent in connection with its mutual fund share class selection practices and the fees it received.
  • Resolution: Order on 03/11/2019
  • Sanctions: The firm was censured, ordered to cease and desist, and pay a civil monetary penalty of $2,700,000.

Unsuitable Investment Recommendations

Some clients have alleged that Stifel, Nicolaus & Co. has made unsuitable investment recommendations, which may result in significant financial losses for investors. For example, former Stifel broker Michael Fahsholtz has been the subject of pending customer disputes alleging unsuitable investments, breach of fiduciary duty, and negligence, among other claims.

Misrepresentation of Investment Risks

Complaints against Stifel, Nicolaus & Co. have also included allegations of misrepresenting investment risks. In a case filed by the SEC, the commission accused Stifel, its employee, and President David W. Noack of misrepresenting the risks of certain investments to their clients.

Excessive Fees and Commissions

There have been a number of complaints against Stifel, Nicolaus & Co. regarding excessive fees and commissions. In a 2020 FINRA sanction, the firm faced allegations of widespread supervisory failures leading to early unit investment trust (UIT) rollovers, which may have incurred $1.9 million in excessive sales charges for customers.

Impact on the Company’s Reputation

These complaints and regulatory actions have certainly had an impact on Stifel, Nicolaus & Co.’s reputation. Customers have expressed dissatisfaction with the firm wealth management’s communication and overall service, as seen in reviews on Trustpilot and the Better Business Bureau. Additionally, the firm has faced fines and sanctions from regulatory bodies like FINRA and the SEC, further highlighting the need for clients to carefully consider their options when choosing an investment firm.

Implications for Investors

These FINRA actions against Stifel, Nicolaus & Co., and its associated brokers serve to highlight the importance of adequate supervision and compliance within the financial industry. Brokerage firms are responsible for detecting misconduct and ensuring the necessary procedures and systems are in place to protect investors.

Keeping informed about the track record and disciplinary history of the brokerage firms and financial advisors they work with is crucial for investors. FINRA’s BrokerCheck is an important resource that helps investors review the background of brokerage firms and individual brokers. By staying informed and vigilant, investors can make better decisions and protect themselves from potential misconduct in the financial industry.

Who is Stifel Financial Corp, Global Wealth Management, Investment Banking

Stifel Financial Corp., operating under the Stifel name since July 1983, is an American multinational independent investment bank and financial services company listed on the New York Stock Exchange since November 24, 1986. The company offers a full suite of services, including brokerage, investment banking, institutional group, trading, investment advisory, and related financial services that cater to individual investors, professional money managers, businesses, and municipalities.

Stifel, Nicolaus & Company, Incorporated, a key component of Stifel Financial, is a brokerage and investment banking firm. They offer a range of services, such as securities brokerage, investment banking, trading, financial advisory, and wealth management. Enties are wholly owned subsidiaries. This traces its roots back to 1890 when it was known as Altheimer and Rawlings Investment Co.. Still, it was rebranded as Stifel Investment Company after Herman Stifel and Henry Nicolaus joined the firm around the turn of the 20th century.

Investment banking services provided by Stifel include financial advisory services, underwriting, capital raising, and other financial solutions for companies. Stifel’s strength lies in its innovative financing projects and techniques, as demonstrated when it secured financing for the assets of a company named Marland Oil in Ponca City, Oklahoma.

Regarding wealth management, Stifel Financial offers private client services, including securities transaction and financial planning services. This includes the sale of equities, mutual funds, fixed-income products, insurance, and banking products to their clients. These services and their institutional equity and fixed-income sales, trading, research, and municipal finance help make Stifel a comprehensive financial services provider.

Lessons for Investors: Due Diligence, Identifying Misconduct, and Taking Action

Protecting your hard-earned money is crucial as an investor by selecting a financial advisor from the right investment firm and staying vigilant for potential misconduct. We’ll discuss the importance of due diligence, financial goals, warning signs of broker misconduct, and the steps to take if you suspect investment losses.

Importance of due diligence when selecting a financial advisor and investment firm

Due business diligence is an essential component of the investment process that allows you to thoroughly evaluate a company’s worthiness before committing your capital. Conducting due business diligence can help you identify investment opportunities with a higher chance of success, lower the potential for losing money, and determine an appropriate investment amount if you decide to commit to resources.

When selecting an investment firm, due diligence is crucial because it can lower risk later in the investment process, ensure a strong and sustainable relationship between the investor and the company being invested in, and protect investors from potential structural risks. Investors should carefully examine the financials, company structure, legal documents, key personnel, employment contracts, vendors, and clients of potential investment firms.

Signs of potential misconduct by brokers

Investors should remain vigilant for warning signs of broker and client misconduct, which can include:

  • Unauthorized trades: Transactions made without your knowledge or consent.
  • Excessive trading (churning): A broker engaging in an excessive volume of buying and selling of securities to generate commissions.
  • Unsuitable investment recommendations: Investments that don’t align with your financial goals, risk tolerance, or investment objectives.
  • Misrepresentation or omission of facts: Providing false or incomplete information about an investment.
  • Failure to execute orders: Not following your instructions for buying or selling securities.

Steps to take if you suspect misconduct or investment losses

If you suspect misconduct or have experienced investment losses, consider the following steps:

  • Gather documentation: Collect all relevant documents, including account statements, trade confirmations, and any written or electronic communication with your broker or investment firm.
  • Contact the advisor or investment firm: Reach out to the firm or financial advisor who’s compliance department to report your concerns and seek clarification or resolution.
  • File a complaint with regulatory authorities: If you’re not satisfied with the response from the client or the investment firm, consider filing a complaint with the Financial Industry Regulatory Authority (FINRA) or the Securities and Exchange Commission (SEC).
  • Consult an attorney: If you believe you have a strong case, consult an attorney experienced in securities law and arbitration to discuss your options for pursuing legal action and potentially recovering your investment losses.

In conclusion, performing due diligence when selecting an investment firm, staying alert for signs of misconduct, and taking appropriate action if you suspect problems can help protect your investments and ensure a more secure financial future.

What Should Stifel Financial Investors Do?

If you are considering legal action against Stifel, Nicolaus & Co., or Joseph Crespi, it is important to seek the assistance of a reputable investment fraud law firm with a proven track record of success.

Haselkorn & Thibaut, P.A. is a leading investment fraud law firm with over 50 years of experience representing investors nationwide. Our attorneys have recovered millions of dollars for our clients, and we work on a contingency fee basis, meaning we only get paid if we recover compensation for you.

We understand the devastating impact that investment losses can have on your life, and your relationships, and we are committed to holding brokers liable and firms accountable for their misconduct. If you believe you have been a victim of investment fraud, do not hesitate to contact us for a free consultation by calling 1-800-856-3352.

 

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