FINRA Fines Stifel, Nicolaus for Rule Violations in Connection with Non-Traditional ETF Sales

The Financial Industry Regulatory Authority (FINRA) recently issued fines totaling $550,000 against broker-dealer Stifel, Nicolaus & Company, Inc. (Stifel Nicolaus ) and its affiliate Century Securities Associates, Inc. (Century Securities).  FINRA had alleged that Stifel Nicolaus and Century Securities violated FINRA rules in connection with their sale of non-traditional, leveraged and inverse exchange-traded funds (ETFs) between 2009 and 2013.   FINRA also ordered Stifel Nicolaus and Century Securities to pay approximately $475,000 in restitution to 65 customers.

FINRA determined that Stifel Nicolaus and Century Securities made unsuitable ETF recommendations to customers with conservative investment objectives through their registered representatives.  FINRA also determined that Stifel Nicolaus and Century Securities’ registered representatives did not understand these products’ unique features and risks.

FINRA found widespread problems with the firms’ supervisory systems for these non-traditional ETFs.   The firms apparently had neither written supervisory procedures relating to these products nor programs designed to provide adequate training for their registered representatives selling these products.

Brokerage customers of Stifel Nicolaus and Century Securities can recover losses by pursuing claims against the firms in arbitration at FINRA Dispute Resolution.  FINRA rules required Stifel Nicolaus and Century Securities to make suitable recommendations to their brokerage customers and it appears that they failed in this respect.  It also appears that the firms misrepresented non-traditional ETFs to many brokerage customers.

Blau & Malmfeldt invites Stifel Nicolaus and Century Securities customers who suffered losses in non-traditional ETFs to contact us at 312-443-1600 for a complimentary case evaluation.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.