FINRA Penalizes Stifel for Recurring Compliance Lapses

Stifel Independent Advisors, LLC (SIA) has agreed to a settlement proposed by the Financial Industry Regulatory Authority (FINRA) regarding alleged repeated compliance failures. The settlement, outlined in a Letter of Acceptance, Waiver, and Consent (AWC), aims to address violations related to the firms' supervision of transactions involving non-traditional exchange-traded products (NT-ETPs).

Stifel, Nicolaus, a long-standing member of FINRA since October 1936, operates as a full-service broker-dealer firm with a significant presence, boasting around 5,000 registered representatives and 450 branch offices. On the other hand, SIA, a FINRA member since July 1991, formerly known as Century Securities Associates, Inc., operates as an introducing broker-dealer firm with approximately 200 registered representatives and 70 branch offices. Both entities are subsidiaries of Stifel Financial Corporation.

This recent settlement follows a prior agreement in January 2014 (AWC No. 2012034576901) in which both Stifel, Nicolaus, and SIA were found to have violated NASD Rule 3010 and FINRA Rule 2010. They failed to establish and maintain supervisory systems for ensuring compliance with suitability obligations regarding transactions involving NT-ETFs. The firms faced censure, a collective fine of $550,000, and restitution totaling $474,613 to affected customers.

Despite previous sanctions and attempts to rectify compliance shortcomings, Stifel, Nicolaus, and SIA continued to exhibit deficiencies in their supervisory systems regarding NT-ETPs during the relevant period. The firms failed to detect and address potentially unsuitable recommendations, resulting in significant customer losses.

During the period in question, the firms neglected to establish, maintain, and enforce adequate supervisory systems, including written supervisory procedures (WSPs), to ensure compliance with suitability obligations related to NT-ETP transactions. These failures constituted violations of NASD Rule 3010, FINRA Rules 3110 and 2010.

Penalties Imposed

‍As part of the settlement, Stifel, Nicolaus, and SIA consented to sanctions imposed by FINRA, including:

• A censure for both firms.
• A fine of $920,000 for Stifel, Nicolaus, and $80,000 for SIA.
• Restitution to affected customers totaling $1,289,937.17, along with interest.

The settlement underscores FINRA's commitment to upholding regulatory standards within the financial industry. Despite previous regulatory actions and efforts to address compliance deficiencies, the repeated failures of Stifel, Nicolaus, and SIA have resulted in significant penalties and restitution payments. This serves as a reminder to brokerage firms of the importance of robust supervisory systems and compliance with regulatory obligations to safeguard investors' interests.

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