Stifel, Nicolaus, an international broker-dealer and investment bank, and its subsidiary, Stifel Independent Advisors, have agreed to pay more than $2 million in fines and restitution for recommending inappropriate products to hundreds of clients, the Financial Industry Regulatory Authority announced.

The broker-dealer and its subsidiary recommended non-traditional exchange-traded products and funds, which are complex financial products, to clients with low or moderate risk tolerances, Finra said. In addition the firms allowed clients to hold the short-term products much longer than intended, the regulator said.

Nontraditional exchange-traded products are designed to be held for a short period of time, as little as one day or one month, Finra said. However, the Stifel representatives had the clients holding investments for up to 454 days, resulting in losses of hundreds of dollars to tens of thousands of dollars for the clients, Finra said. Because of the lack of proper supervision, the extended holding times for the products were not corrected, Finra said.

Collectively, the firms' actions resulted in customer losses of $1,289,937.17 million in 381 accounts, the complaint said. Finra ordered, and the two Stifel companies agreed to pay, that amount in restitution.  The two firms also agreed to pay a total of $1 million in fines. The agreement was reached without Stifel admitting to or denying the findings.

Stifel declined to comment on the Finra findings.

For instance, an 87-year-old customer with a conservative risk tolerance purchased a daily-reset nontraditional exchange traded product August 2015 and held it for 454 days, resulting in a loss of about $5,000, Finra said.

In another case, a 77-year-oId customer with a risk tolerance of moderate growth purchased a daily-reset product in August 2015 and held it for more than one year, resulting in a loss of about $13,000, Finra said.

Stifel, Nicolaus has about 5,000 registered representatives and 450 branch offices. The advisory subsidiary, which was previously known as Century Securities Associates, has about 200 registered representatives and 70 branch offices.

As early as January 2014 the companies were told they did not have adequate supervisory policies in place, Finra said. A subsequent “clean up” of accounts was undertaken by the firms, but even that activity was insufficient to prevent the problem going forward, Finra noted.

The clean up “was not sufficient in certain instances to prevent representatives from continuing to recommend a strategy of buying and then holding these products for periods well beyond the periods identified in the products' prospectuses,” Finra said in the complaint.