NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Ryan Beck & Co. nka Stifel Nicolaus & Company, Incorporate
AWC/2008015700901

The Firm failed to establish an effective supervisory system and written supervisory procedures reasonably designed to ensure that discounts were correctly applied on eligible UIT purchases. The Firm’s written supervisory procedures had limited information regarding UIT sales charge discounts, and omitted the fact that certain UIT sponsors permitted exchange discounts for purchases made with the proceeds from a UIT holding of another sponsor; this was particularly relevant because the firm’s UIT business was almost exclusively with UIT sponsors that provided this sales charge discount.

The Firm's procedures lacked substantive guidelines, instructions, policies or steps for brokers, trading personnel or supervisors to follow to determine if a customer’s UIT purchase qualified for, and received, a sales charge discount. The broker and firm compensation diminished when the customer received a sales charge discount and, because of this, the firm needed to be particularly diligent in providing guidance to brokers, supervisors and trading personnel on UIT sales charge discounts.

The Firm failed to provide eligible customers with appropriate discounts on both UIT rollover and breakpoint purchases. The firm failed to identify and appropriately apply sales charge discounts in certain top-selling UITs and, as a result, the firm overcharged customers in the sample approximately $20,000.

In addition, the Firm sold UITs that imposed a deferred sales charge that was generally charged upon redemption if a customer sold a UIT before the deferred sales charges were imposed. Moreover, the Firm failed to ensure that its customers’ UIT purchase confirmations included the required language stating that “on selling your shares, you may pay a sales charge. For the charge and other fees, see the prospectus.” The Firm misstated on certain UIT confirmations that a sales charge discount had been applied when, in fact, it had not.

Ryan Beck & Co. nka Stifel Nicolaus & Company, Incorporate: Censured; Fined $100,000; Agreed to provide remediation to customers who purchased unit investment trusts (UITs) and qualified for, but did not receive, the applicable sales charge discount, and will submit to FINRA a proposed plan of how it will identify and compensate customers and a schedule detailing the total dollar amount of restitution provided to each customer.

Tags: Supervisory System  UIT