Stifel, Nicolaus & Company [[sf]] has a reputation as a straight-shooting company. The regional brokerage, based in St. Louis, avoided accusations of biased stock research that ensnared many other brokerages at the time of the tech-stock bust. The company has not previously seen any of its Missouri brokers charged with securities violations by the state Securities Division. But all is not well with the company. In fact, Stifel, Nicolaus has recently shown that it has little concern for its brokerage clients, beyond its desire to extract as much money as possible from them. One of the company’s brokers, Girard Augustus Munsch Jr., was recently sanctioned and fined by the Missouri Securities Division for excessive trading in client accounts. How excessive?
One client, an 81-year old with a net worth below $250,000 and a liquid net worth under $100,000 (according to brokerage documents), paid $63,861 in commissions over three years on a total of 262 stock trades. In his deposition, the broker (Munsch) stated that for many of the trades, he was the only one to benefit. In other words, the trades were executed solely to garner trade commissions.
Another client, 72-years old when the client began with Munsch, had 122 stock trades over three years in her account, generating $32,389 in commissions for Stifel, Nicolaus. According to brokerage documents, this client had liquid assets of under $100,000. When interviewed by securities regulators, the client stated that she wanted to keep her money in mutual funds and to avoid high risk stocks. Girard Munsch acknowledged that he was was aware that he was the only beneficiary of many of his client’s trades, and that did not bother him.
There are of course bad apples in every bunch. But Stifel, Nicolaus showed willful negligence and a casual disregard for the financial well-being of its clients in how it managed Munsch. Back in 2000 Munsch was put under heightened supervision due to customer complaints of unauthorized trading. Due to client complaints of unsuitable investments, Munsch was again put on heightened supervision in March of 2003 and 2004. Munsch’s supervisor, while requiring a phone log to make sure that he was acting appropriately, never checked that log or instructed Munsch in completing the log. Evidently it takes more than repeated mistreatment of clients to get a broker fired from Stifel.
The punishment meted out by the Missouri Securities division is of course insufficient. Munsch should be barred from working as a broker. Instead, he has to be closely supervised and pays a meager fine of $105,700. For a successful broker, such a sum is far less than one year’s salary.
Stifel, Nicolaus, despite failing completely to supervise Munsch and to fire him after earlier violations of the law, gets off without a fine. A fine of $10 million would have been appropriate. However, the broker did one thing right : when I checked with Stifel, Nicolaus, I was told that Munsch had “retired”.
Disclosure: I have no position in any company mentioned.
0 thoughts on “Stifel, Nicolaus, and a Broker’s Theft of Client Money”
Here are the quotes from the Missouri Securities Division consent order regarding the excessive trading. (MR1 means Missouri Resident #1):
“Account statements and trade confirmations provided by Stifel show that during 2004, Munsch recommended sixty-two (62) trades in MR1’s account, turning over her entire equities portfolio three times, generating commissions of fifteen thousand, four hundred and ninety-eight dollars ($15,498.00).
During 2005, Munsch recommended ninety-one (91) trades in MR1’s account, generating commissions of twenty-one thousand, eight hundred five dollars ($21,805.00).
During 2006, Munsch recommended one hundred and nine (109) trades in MR1’s account, generating commissions of twenty-six thousand, five hundred fifty-eight dollars ($26,558.00).”
“A review of account statements and trade confirmations showed that in 2004 Munsch performed fifty (50) trades in MR2’s account, generating commissions of thirteen thousand, five hundred eight dollars ($13,508.00).
During 2005, nine (9) trades were performed in MR2’s account, generating commissions of two thousand, sixteen dollars ($2,016.00).
During 2006, sixty-three (63) trades were performed by Munsch, generating commissions of sixteen thousand, eight hundred sixty-five dollars ($16,865.00)
I have bad esperiences with Stiefel Nicolaus. Don’t trust them!! The Melborne Florida office of Stiefel Nicolaus, including the Manger of that office (Jim Potter) is responsible for losses in my accoutns exceeding $250,000. Mr. Potter and his associates placed unsuitable investments in my accounts including one with Mogan Keegan Funds that is now worthless. At the same time Stifel Nicolaus charged me management fees for the mismanagement of my assets. These people have no idea with they are doing and they don’t pay attention to what is happening in the economy as it impacts the assets under their management. Anyone considering an association with Stiefel Nicolaus should reevaluate their decision and look elseware. I moved all my accounts to Northwestern Mutual Wealth Management.
Ernest — I think the better conclusion to draw is that you should avoid all full-service brokers. They have their interests at heart, not yours. Stick to a fee-only financial adviser.