By Kenneth Corbin

Stifel has been hit with a large penalty in an arbitration case stemming from a broker's structured-notes strategy that has resulted in more than a dozen investor complaints.

A three-person arbitration panel convened by brokerage industry self-regulator Finra this week held that Stifel must pay $132.5 million to resolve allegations of a breach of fiduciary duty, negligence, and fraud, among other alleged violations.

The regulator says that it is the second-largest award in Finra arbitration history. The largest involved a dispute between STMicroelectronics and Credit Suisse Securities USA, in which the unit of the Swiss bank was ordered to pay $400 million. The Stifel case, however, marks the largest award granted to retail investors through the Finra arbitration forum.

The case involves Stifel broker Chuck Roberts, a 34-year industry veteran who is facing a litany of complaints contending that he overconcentrated clients' holdings in structured notes.

Although Roberts' investment strategies are at the heart of the complaints, he isn't named as a respondent in the claims, which are solely targeting Stifel.

"We are disappointed by and disagree with this panel's decision," Stifel says, adding that it plans to "seek judicial review of this outsized award, which is supported by neither the facts nor the law."

"The claims were brought by a sophisticated family of experienced and aggressive investors who understood the risks involved, participated in the selection of investments, monitored them closely, and only complained after incurring losses," the firm says. Roberts didn't immediately respond to a request for comment.

Jeffrey Erez, a lawyer for the plaintiffs, says he is unfazed by any challenge Stifel might bring to overturn the award.

"We'll take it up with the court," he says. "They threatened that last time -- they never did it."

Indeed, Stifel vowed to seek a judicial review of a $14.3 million award an arbitration panel granted another set of Roberts investors in October. Stifel confirms it paid the award and never sought the judicial review it said it would pursue at the time.

Erez's firm has been handling most, though not all, of the cases involving Stifel and Roberts. His firm won a smaller award in a second case that was decided in November, and he says he has 16 more cases involving Stifel and Roberts in the pipeline, the first of which is scheduled to begin arbitration proceedings next week.

"I've got them one a month for the next two years," he says.

The $132.5 million award includes compensatory and punitive damages, as well as about $25.5 million in lawyer fees and costs.

The claimants are David Jannetti and his children Sarah Lyn Jannetti, Adam Jannetti, and Leah Jannetti.

In a strongly worded document detailing the award, the arbitrators call Stifel's conduct "egregious." They say the firm failed to adequately supervise the broker, allowing him to engage in investment strategies that disregarded the clients' "investment philosophy" and put the interests of the firm ahead of the investors.

"Respondent had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to claimants would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in damage," the arbitrators write.

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March 13, 2025 16:34 ET (20:34 GMT)

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