By Sarah N. Lynch
WASHINGTON Jan 9 Two brokerage units of Stifel
Financial Corp will pay more than $1 million to settle
civil charges alleging they sold risky, ill-suited
exchange-traded fund products to certain customers, Wall
Street's self-funded regulator said Thursday.
The Financial Industry Regulatory Authority said Stifel,
Nicolaus & Company, Inc and Century Securities Associates Inc
will pay fines of $550,000 and restitution of $475,000 to 65
harmed customers, without admitting or denying the charges.
"Stifel and Century are pleased to have resolved this
matter. We will continue to serve our clients, consistent with
their investment goals," said Tim Beecher, a spokesman for the
The risky products at the heart of the case - leveraged and
inverse exchange-traded funds - have been in regulators' sights
now for several years.
These funds are designed to amplify short-term returns by
using debt and derivatives. Although they can help investors
earn a lot of money, they can also magnify losses, making them
more suitable for professional traders.
Both FINRA and the Securities and Exchange Commission have
been looking more closely into these funds to see if they are
adequately transparent for retail investors and are not helping
to fuel market volatility.
In 2009, the regulators jointly issued an investor alert
warning retail investors about the risks of investing in such
In 2012, FINRA's enforcement chief Bradley Bennett also told
Reuters that his office was planning to bring cases against
brokerages who were engaged in unsuitable sales of leveraged and
In the case on Thursday, FINRA alleges that Stifel and
Century sold the products between January 2009 and June 2013 to
retail customers who did not understand the unique features and
In addition, FINRA said the brokerages did not have the
proper policies and procedures in place related to the sale of