FINRA fines Stifel, Nicolaus & Co for violations involving mutual funds


Stifel, Nicolaus & Co will have to pay a fine of $ 1.75 million, as well as a restitution of $ 1.9 million to more than 1,700 clients in connection with the first rollovers of Unit Investment Trusts.

The United States Financial Sector Regulatory Authority (FINRA) today ad that it ordered Stifel, Nicolaus & Company, Incorporated to pay approximately $ 1.9 million in restitution, plus interest, to more than 1,700 clients in connection with the first rollovers of Unit Investment Trusts (ITU). FINRA also fined the broker $ 1.75 million for providing inaccurate information to clients regarding turnover costs incurred and related supervisory violations.

A registered representative who recommends that a client sell their UIT position before the expiration date and then ‘roll over’ those funds to a new UIT results in an increase in the client’s selling costs over time, which raises costs. adequacy issues, says FINRA.

From January 2012 to December 2016, Stifel executed approximately $ 10.9 billion in ITU transactions, of which $ 935.2 million was advance refinancing. FINRA found that the company’s monitoring system and procedures were not reasonably designed to monitor the adequacy of these early renewals. For this reason, Stifel did not identify that its representatives had recommended potentially inappropriate early renewals which, collectively, could have resulted in sales charges of approximately $ 1.9 million for customers they did not have. incurred if they had held the ITUs until their expiry date.

In addition, during the same period, Stifel sent approximately 600 letters to customers that contained inaccurate information or lacked information on the costs incurred by customers in connection with initial UIT reversals or “switchings”. On average, these letters underestimated costs to customers by around 49%.

This action is the result of a 2016 targeted review of IUTs. Additionally, FINRA’s 2018 Regulatory and Review Priorities Letter indicated that FINRA would review ITU-related corporate supervisory controls.

In settling this case, Stifel neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.


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