On March 13, a Financial Industry Regulatory Authority arbitration panel ordered Stifel Financial to pay a family $132.5 million for misrepresenting the risks of complex structured notes, leading to significant losses. The panel, composed of three members, awarded $26.5 million in compensatory damages, $79.5 million in punitive damages, and $26.5 million for legal fees to David Jannetti of Miami Beach, Florida, and his children Sarah, Adam, and Leah from New York.
Stifel stated its intention to appeal on Thursday, characterizing the Jannettis as "a sophisticated family of experienced and aggressive investors" who allegedly comprehended, selected, monitored, and raised concerns about the investments only after losses occurred.
The Jannettis sought confirmation of the award from a Miami federal judge, issued against Stifel's wealth management and investment banking unit, Nicolaus, labeling it equivalent to 19% of the parent company's profit in 2024.
In an interview, the Jannettis' lawyer, Jeffrey Erez, specified that the dispute revolved around auto-callable contingent coupon notes. He alleged that the Stifel broker lacked an understanding of the notes' risks, tied to the performance of the SPDR S&P Biotech ETF and companies like DocuSign, Dynatrace, Palantir Technologies, and Twilio.
Erez disclosed that the Jannettis suffered "a staggering amount of money" – around $16 million over three years, the majority of their investment – due to the broker's excessive focus on the notes while disregarding their investment objectives.
"We're extremely pleased with the award," Erez stated. "This sends a strong message to Stifel and other broker-dealers that failing to uphold industry and compliance regulations will result in consequences."
As of the end of 2024, Stifel boasted 2,229 financial advisers and managed assets worth $501 billion.