By Kenneth Corbin
Stifel Nicolaus has agreed to pay more than $450,000 to settle allegations that it failed to adequately oversee representatives who held power-of-attorney authorities on behalf of clients, among other alleged compliance failures.
Brokerage industry self-regulator Finra alleges that from April 2014 through February 2021, Stifel didn't have a sufficient system in place to monitor the movement of money by reps with power-of-attorney agreements, including one former advisor who allegedly stole at least $105,000 from a client simply by writing checks to himself.
That broker, who had been granted an exception to Stifel's policy prohibiting advisors from having power-of-attorney agreements on behalf of nonfamily members, allegedly continued to attempt to steal from the client even after he had been investigated -- and cleared -- by Stifel.
Finra also cited Stifel for failing to respond to red flags stemming from another advisor's risky and unsuitable trading strategy.
Stifel settled the matters involving both brokers without admitting or denying the conduct Finra alleged but accepted a censure and agreed to pay a $400,000 fine and restitution of more than $59,000, plus interest.
A Stifel spokesman didn't immediately respond to a request for comment.
Finra said its review of Stifel's practices regarding power-of-attorney arrangements followed the firm's dismissal of a broker in January 2020. The firm disclosed "that he was terminated for taking 'money from a client account for his personal use without authorization,'" the regulator said, citing Stifel's U5 form summarizing the broker's departure from the firm.
Finra cited its past guidance directing firms to ensure that they have policies and procedures in place governing the withdrawal or transfer of funds from client accounts, including when advisors have power-of-attorney authorities.
In the case cited in Stifel's letter of acceptance, waiver, and consent $(AWC.SI)$ with Finra, the broker in question obtained power of attorney to act on behalf of a senior client in 2011. From April 2014 through October 2018, the broker allegedly wrote six checks drawing on her account to steer at least $105,000 directly to himself or into accounts he controlled.
Stifel granted the advisor an exception to serve as power of attorney for a nonfamily member in 2011, but the brokerage "didn't have written policies and procedures specifically addressing review of accounts where representatives of the firm were serving as power of attorney, nor did the firm provide guidance or training specific to supervision of accounts where registered representatives served as power of attorney," the AWC letter states.
The power-of-attorney arrangement meant that the account was coded as an employee-related account, which triggered a monthly review under Stifel's policies, but those reviews didn't uncover the checks the broker was writing to himself from the client's account, according to the AWC letter.
Then in May 2019, when Stifel was conducting a "retroactive review of all nonfamily power-of-attorney relationships," the firm identified a $5,000 check from the client's account dated August 2018 that the broker had written to himself, according to the letter. He explained that the money was to reimburse himself for the client's nursing home expenses, "despite the fact that, as power of attorney, Broker A had the ability to write checks directly to the nursing home," the letter states. "The firm then closed its investigation based on Broker A's representation."
Then in December 2019, the broker attempted to transfer the remainder of the funds in the client's account to himself. Stifel blocked the transfer, began investigating, and terminated the broker "shortly thereafter," according to the AWC letter.
In February 2021, Stifel stopped granting power-of-attorney exceptions for nonfamily members and enshrined that "prohibition without exceptions" as company policy the following July, according to the AWC letter. "Customer A's estate was fully reimbursed for Broker A's misconduct."
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March 20, 2024 08:17 ET (12:17 GMT)
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