MW Stifel ordered to pay $132 million for allegedly misleading investor on risky structured notes

By Steve Gelsi

Finra panel says Stifel was 'required to have heightened supervision' of a broker

A Finra arbitration panel has ordered Stifel Financial Corp. to pay about $132 million in damages for allegedly misleading investors by pitching a product as less risky than it actually was, as part of a series of legal actions against a specific broker.

Breaking out about $27 million in legal and other fees, the award of $105 million in compensatory and punitive damages ranks as the second-largest investor award in the history of the Finra arbitration forum, a spokesperson for the securities industry group said.

The $132 million payment amounts to more than half of Stifel's fourth-quarter net income of just under $235 million that it reported on Jan. 29. The bank's profit rose 53% over the year-ago period on record net revenue of $1.38 billion.

A Stifel spokesperson said the bank plans to "seek judicial review of this outsized award, which is supported by neither the facts nor the law."

A "sophisticated family of experienced and aggressive investors" that brought the claim fully understood the risks involved, participated in the selection of investments, monitored them closely and "only complained after incurring losses," the bank's spokesperson said.

Stifel's (SF) stock fell 1.9% on Thursday, as equity prices moved lower.

Individual investor David Jannetti alleged the bank committed a breach of fiduciary duty; negligence; fraud; a breach of contract; and the violation of the Florida Securities and Investor Protection Act.

The panel said Stifel had "actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage" would result from overconcentration of the claimants' accounts in structured notes, as well as an overconcentration of accounts in limited industries.

The bank chose not to send an "over concentration" letter and didn't address the issue in a phone call meeting, the ruling said.

The panel also ruled the Stifel branch manager had no knowledge that the financial adviser involved in the transactions, Chuck Roberts, was required to have heightened supervision.

Jeffrey Erez, the lawyer for Jannetti, told MarketWatch the arbitration ruling marked one of 19 cases he's handled involving Roberts.

"We have hundreds of texts between Roberts and his clients presenting these structured notes as a low-risk product with a predictable yield, but it's not," Erez said.

Including the Jannetti case, Erez said he's now won three out of the 19. The fact that three different arbitration panels have ruled in favor of his clients "is not a coincidence," and reflects the strength of claims by investors, he said.

"It always amazes me - you're playing with people's lives, not just their money," he said. "When you don't play by the rules ... to enrich yourself, you're potentially ruining people's lives."

While structured notes are a popular financial product that draws billions, they were sold in a misleading way, Erez said.

Finra's arbitration panel was part of its dispute-resolution service, which addresses investor and employee legal claims against brokerage firms.

Roberts has 34 years of experience including time at Stifel, but he's currently facing several investor claims dating back to 2020 totaling more than $20 million in damages, according to Finra filings.

Finra stands for the Financial Industry Regulatory Authority, a private corporation that oversees U.S. brokerage firms and exchanges.

Steve Goldstein contributed.

-Steve Gelsi

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March 13, 2025 10:19 ET (14:19 GMT)

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