Troubles are brewing in sunny Miami, where a storm of complaints is swirling around a strategy involving structured notes crafted by a Stifel Nicolaus & Co broker. The latest tally? A staggering $24.5 million in damage claims, spotlighted by a recent arbitration dispute filed on July 21. But what’s the big fuss all about, and why should investors prick up their ears? Let’s dive in.
A Trail of Complaints
In this unfolding saga, nine arbitration filings are lined up like dominoes, each one a grievance aimed at the firm Stifel, not the broker Chuck A. Roberts. These filings are no small squabbles, with damages sought ranging from $500,000 to a cool $5 million. The charges? As reported by Jeff Erez, a Miami lawyer, negligence, breach of fiduciary duty, and unauthorized trading is championing the cause of eight claimants.
So, what’s the core of the matter? According to Erez, some of the structured notes that Roberts fashioned were chock-full of a mercurial biotech index or traded with a frequency that would make a hummingbird look slow—all to generate commissions. James Sallah, another attorney in the mix, doesn’t mince words. He describes it as a quest “to generate as much money as possible for the broker.” Is this a fair shake for the investors?
The Broker’s Side of the Story
While Roberts, captain of the CR Wealth Management Group, remains tight-lipped—his office phone echoing unanswered—Stifel is prepping its defenses. Despite their policy of silence on pending litigation, whispers suggest that the firm plans to argue that these weren’t greenhorn investors but seasoned pros who knew the game and the stakes involved.
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But wait—there’s a twist. Earlier this year, Stifel shot down a complaint suggesting a client was hoodwinked about the risks of structured products. And another disgruntled investor withdrew a $3 million complaint, with no public word on why.
A Tumultuous Tide for Stocks
Let’s take a closer look at these structured notes. Erez reveals that Roberts had a penchant for doubling down on specific stocks, such as Dynatrace, Pinterest, and Snapchat, or riding the rollercoaster of potentially volatile indexes, like the SPDR S&P Biotech ETF (NYSE: XBI). Fast forward to late 2021 and 2022, and this strategy took a nosedive. The biotech index, for instance, plummeted from a high of $166.78 per share in February 2021 to a dismal $63.07 in June 2022. Presently, it’s limping along at around $80 per share.
Roberts’ clients weren’t gifted a discount, either. He charged commissions hovering between 1.5% to 2%. Erez doesn’t brand these rates as steep, but with frequent trading, those fees compound like a snowball rolling downhill. How much should commission fees influence an investor’s choice of broker?
A Look into the Past
Roberts is no rookie. His career, which launched in 1990 at Lehman Brothers, has seen stints at an ensemble of firms, ending up at Morgan Stanley’s Smith Barney predecessor Inc. in 2005. He stuck with Morgan Stanley until 2016, then set sail for Stifel—where, despite the current turbulence, he remains in good standing.
Peering further into the rearview mirror reveals more clashes. Roberts’ BrokerCheck record isn’t pristine, marred by a four-month suspension, a $40,000 fine, and a settled complaint for $202,000 from earlier in his career. Could past troubles have served as a weather vane for the current storm?
As the clouds gather over this dispute, involved parties from Bravura Insurance Company, Maercks Family Management, Noble Insurance, and The Harbor Group of New York are keeping mum, with no comments offered—at least for now.
So, investors, where does this leave us? In a world of investments teeming with potential rewards and risks, how crucial is it to truly understand where, why, and with whom you’re investing your hard-earned cash? Time, and perhaps a judge, will tell.