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Stifel, Nicolaus & Company Fined, Ordered to Pay Restitution Totaling $600,000

Financial Industry Regulatory Authority (FINRA) member firm Stifel, Nicolaus & Company, Incorporated has been fined $350,000 and ordered to pay $250,000 in restitution to customers for failing to supervise registered representative Kenneth Neely who had pending complaints against him, carried over from a previous business.

FINRA Case #2009020149801

Specifically, the broker allegedly perpetrated a Ponzi scheme which FINRA believed should have been recognized by Stifel due to several red flags or indicators that something was amiss:

First, the broker logged a significant amount of customer complaints and was experiencing severe personal financial difficulties. Stifel also failed to act appropriately upon letters it had discovered concerning the fictitious St. Louis Investment Club. The firm was found to have failed to adequately investigate e-mail and other correspondence from customer to broker; instead, a supervisor allegedly dismissed the discovered letters and turned a blind eye to the rogue representative's fraudulent Ponzi scheme.

FINRA found that the firm's negligent conduct and lack of proper supervision allowed the broker's misconduct to continue and even thrive to the tune of several hundreds thousand dollars. Even though it was the broker who was troubled, with this decision, FINRA has sent the message that a firm is indeed responsible for proper supervision of the outside business activities of its associates and representatives.

In a separate decision, FINRA barred Neely from the industry (Case #20080157230901).

If you suspect a firm or broker has engaged in financial misconduct, such as a Ponzi scheme, that have proven harmful to your investment or interests, call The Law Offices of Jonathan W. Evans & Associates at 818-760-9880 for an investigation and consultation.