Citing 'egregious conduct,' Finra panel awards Stifel clients a stunning $132.5 million

A three-person arbitration panel overseen by Finra Dispute Resolution Services stunned the financial advice industry on Wednesday and awarded clients of Stifel Financial Corp. $132.5 million in damages and legal fees in a dispute centered on a star Stifel broker in Miami, Chuck Roberts.

David Jannetti and family members in 2023 sued Stifel Nicolaus & Co., the broker-dealer subsidiary of Stifel Financial, claiming at least $5 million in damages related to investments in structured notes, a strategy that has resulted in several previous significant arbitration claims and damages to clients.

But Wednesday’s arbitration decision by a Finra panel in Boca Raton, Fla., is the most significant. “This is the largest retail award in Finra arbitration history,” said Jeff Erez, the attorney for the Jannetti family as well as other investors who have sued Stifel for damages related to structured notes. Erez noted that only institutional investors have scored bigger wins in terms of damages firms were ordered to pay clients.

“The arbitration panel really threw the book at Stifel,” said Andrew Stoltmann, a plaintiff’s attorney. “This is a major – and embarrassing - black eye.”

According to Stifel Financial’s most recent earnings report from January, the company in 2024 generated $2.42 billion in pre-tax income from its global wealth management group. Wednesday’s arbitration award represents close to 5.4% of Stifel’s wealth management income from last year.

Stifel has previously lost claims stemming from Roberts’ sale of structured notes. In November, a Finra arbitration panel awarded investors $2.35 million in one claim; a month earlier, another group of arbitrators awarded investors $14.2 million in a similar claim, including $9 million in punitive damages.

“These are strong cases and text messages are a big part of why these cases are being won by clients,” Erez said. “There are 16 more claims to come.”  

In this week’s award, the arbitrators ordered Stifel Nicolaus to pay David Jannetti and family $26.5 million in compensatory damages, $79.5 million in punitive damages and $26.5 million in attorneys fees and costs. Awards of punitive damages are rare in Finra arbitration cases.

The Stifel advisor at the heart of the dispute, Roberts in Miami Beach, was not sued in the matter, but referred to four times in the Finra award.

“Stifel plans to seek judicial review of this outsized award, which is supported by neither the facts nor the law,” the company said in a press release Thursday morning. “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 Finra arbitration panel pointed to “egregious conduct” by Stifel in the matter, according to the award document.

Stifel “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,” according to the award.

That conduct by Stifel included: overconcentrating the clients’ accounts in structured notes, as well as limited industries; disregarding the clients’  investment philosophy; and placing the financial interest of Stifel ahead of the interests of customers.

Stifel also permitted and encouraged “custom” structured note products via texts in violation of the Securities and Exchange Commission recordkeeping requirements which texts contained inaccurate and misleading terminology, according to the award. Those text messages, however, were not included in the Finra panel’s decision.