The Massachusetts secretary of the commonwealth has slapped a $3.2 million penalty on Stifel, Nicolaus & Company Inc., saying the broker-dealer failed to look at red flags that state residents, nonprofits and charges were being overcharged and saddled with unauthorized fees by one of its agents.
William F. Galvin, the state’s secretary, imposed a fine of $2.5 million on Stifel, and also required the firm to pay more than $700,000 to affected customers in Massachusetts as part of a consent order that Stifel entered into with the state’s Securities Division.
Galvin’s team said that former agent Joseph R. Crespi had engaged in predatory sales practices with his clients over several years, and that these activities earned him higher commission sales for himself and Stifel.
A spokesperson for the St. Louis-based Stifel said the firm will not comment.
“Despite repeated warnings by Crespi’s own branch manager, Stifel failed for years to discipline Crespi or take any meaningful actions to correct his behavior,” Galvin’s office said.
Galvin’s team said that Crespi was suspected of making trades not authorized by clients, one of which was in the account of a client who had died.
“Crespi took steps to attempt to disguise his actions, though his branch manager and other internal systems repeatedly flagged his transactions for review,” Galvin’s office said. “Nonetheless, Stifel allowed the misconduct to continue for more than three years before terminating the agent.”
According to his BrokerCheck page, Crespi left Stifel in February 2022 for Ameriprise, where he worked for less than a year. His disclosures with the Financial Industry Regulatory Authority say he resigned voluntarily by November 1 amid a pending review of his conduct. There were only three previous customer complaints about unauthorized trading, all of which were denied. The BrokerCheck page does not currently show him as being registered, though no disciplinary records against Crespi could otherwise be found on Finra’s website.
Crespi could not be reached via available phone numbers on public directories.
According to the complaint by Galvin’s office, his branch manager had reservations about Crespi’s activity.
For instance, said the consent order, on January 7, 2020, Crespi’s branch manager told him that his explanation for one trade didn’t make sense—in this case, a client sold a long-term mutual fund purchased less than two months before even though it had a 4.24% front-end load.
The branch manager “later forwarded [Crespi’s] explanation to a Central Supervision Employee’s statement who responded that he could ‘work with’ an explanation [Crespi] provided.” Though the branch manager said he was not comfortable with the trade, it was approved.
Crespi “was Stifel’s sixth-highest revenue-producing employee in New England as of June 30, 2019 (as considered year-to-date) and continued to be a top producing agent of Stifel thereafter,” the consent order said.
The Securities Division also rebuked Stifel for other problems, including “multiple instances of Stifel employees using personal cell phones to conduct business and distributing retail communications in violation of firm and regulatory requirements.”
Third Action In Five Years
Galvin’s office said this is the third enforcement action the Securities Division has taken against Stifel in five years. In 2018, the division fined Stifel $300,000 after saying the company failed to supervise reps who had charged advisory clients in the state more than $1 million in commissions from 2012 through 2017. In 2021, it fined Stifel $100,000 for failing to supervise an agent who it said had overconcentrated clients in precious metal investments.
“As the size of this [current] fine illustrates, I will not tolerate repeated rule-breaking by firms that enact toothless compliance and supervisory systems, while placing their own bottom line above investor protection,” Galvin said Monday. “This firm failed its customers when it dragged its feet for years, avoiding taking meaningful action to protect their best interests.”