Massachusetts fined Stifel, Nicolaus & Co. Inc. of St. Louis $2.5 million, and ordered them to pay $712,612 to customers as restitution after an investigation revealed that a broker/dealer agent had used 'predatory practices' for several years, and Stifel did not act to stop this.
According to an agreement between Stifel Securities Division and Stifel, the Massachusetts Securities Division examined internal Stifel communications that showed Stifel knew about broker-dealer Joseph Crespi's questionable trading practices. One Stifel employee commented that Crespi was likely to continue violating certain rules because "the spots of a leopard don't change."
William Galvin, Massachusetts Secretary of Commonwealth, said that the fine was a clear indication of his unwillingness to tolerate firms who repeatedly violate rules by implementing toothless compliance systems and supervisory mechanisms, while putting their bottom line ahead of investor protection. This firm has failed its customers by dragging its feet and avoiding meaningful action for years to protect their interests.
Stifel's spokesperson declined to make any comment. Crespi was not available for comment. Stifel, Nicolaus & Co. Inc., a subsidiary company of Stifel Financial Corp., (NYSE: SF), could not be reached for comment.
According to a press release from Galvin's Office, which includes Securities Division, the consent order mentions Crespi's suspicions of trading in accounts not authorized by their clients. At least one case involved a trade that was made on a client's dead account.
Crespi tried to conceal his actions even though his branch manager, and other internal systems, flagged him for review on numerous occasions. Stifel, however, allowed the misconduct to persist for over three years before terminating this agent.
According to the consent order, Crespi's actions resulted in higher commission sales both for him and Stifel.
The consent order says that 'in particular, (Securities) Division discovered a compliance program and supervisory system which failed to take timely actions in response to red flags, such as elderly Massachusetts residents being charged excessive and, in some cases, unauthorized fees'.
Galvin stated that the consent order issued on April 28 is the third of a series enforcement actions taken by the Securities Division against Stifel in the last five years.
Stifel was ordered in 2018 to pay a fine of $300,000 and to make written offers of compensation to customers who were harmed after the Securities Division determined that Stifel had failed to supervise agents of a Massachusetts branch who billed Massachusetts advisory clients over $1 million in commissions between 2012 and 2017.
Stifel will be fined $100,000 in 2021 for failing to supervise an agent of a broker-dealer who recommended "unsuitable and excessively concentrated investments" in precious metals. Massachusetts customers suffered losses in excess of $430,000. Stifel also had to pay a fine of $100,000 and reimburse $133,907 to one customer, as well as offer compensation to other customers who were harmed.
Crespi, after his termination from Stifel Financial Services LLC in April 2022, worked at Ameriprise Financial Services LLC between November 2022 and April 2022. According to the Financial Industry Regulatory Authority, he resigned when notified that he had been suspended pending a review of his conduct relating to acting outside of the scope of duties. FINRA reported that he is no longer registered to be a broker.
Stifel announced a net profit of $157.5m in the first three months of 2018, a decrease of 9.2% from the same period of 2022. The revenue totaled $1 billion, which is a 1% decrease year-over-year. Stifel increased its bank deposits in the first quarter by $1.2 billion, with a diverse base. Stifel Bancorp's deposits totaled 28.3 billion dollars as of March 31, compared to 27.1 billion dollars at the end 2022 -- an increase of 4.5%.