SEC Fines Stifel $300K Over Failure To Disclose “Trade Away” Fees
Securities Exchange Commission
vs. Stifel, Nicolaus & Company, Incorporated
Background: Stifel is a retail and institutional brokerage and investment banking firm headquartered in St. Louis, Missouri with branch offices located throughout the United States. It has been registered with the SEC as a broker-dealer since 1936 and as an investment adviser since 1975.
Overview of Allegations: Stifel offers its clients an opportunity to invest in several separately managed wrap fee programs. Through the programs, advisory clients pay an annual fee in exchange for receiving access to select subadvisers and trading strategies, advice from Stifel’s financial advisors, and trade execution services through Stifel at no additional cost. However, subadvisers may execute trades or “trade away” through another broker who may charge additional commissions or fees.
Stifel began collecting “trading away” cost information in the first quarter of 2015, but did not adopt and implement adequate policies and procedures to track and disclose trading away practices by certain of the sub-advisers participating in Stifel’s separately managed wrap fee programs, and did not disclose such additional costs to its clients.
By failing to adopt and implement such policies and procedures, Stifel violated Section 206(4) of the Advisers Act and Rule 206(4)-7.
Result: Without admitting or denying the findings, Stifel agreed to a cease and desist order and to pay a fine of $300,000.