FOR IMMEDIATE RELEASE
Tuesday, January 24, 2012
Contact: Ryan Hobart, (573) 526-0949
Carnahan Secures More Than $500,000 for Missouri Investors
Stifel, Nicolaus Settlement Returns Savings to Investors Harmed in Criminal Investment Scam
Jefferson City, MO – Missouri Secretary of State Robin Carnahan today announced a nearly $1.1 million settlement with Stifel, Nicolaus & Company, Inc., after Securities Division investigators discovered that the firm failed to reasonably supervise an agent who operated a criminal investment scheme while at the firm.
In the consent order issued this week, Stifel agreed to pay restitution and interest of $531,385 to 10 investors across Missouri and three other states. The settlement ends a lengthy investigation by the Missouri Securities Division, triggered by an investor complaint questioning a securities purchase not on the books of the broker-dealer.
Kenneth Neely, who operated the scheme and is now serving 37 months in a federal correctional facility, worked from Stifel’s St. Peters branch office from October 2002 to January 2007.
“Missouri investors deserve to know their savings are being handled properly regardless of whether they use a nationally known firm or a local broker,” said Carnahan. “Every firm has a duty to supervise and to take steps to detect fraudulent activity by its agent, and this action reinforces that investors should always exercise caution when looking at potential investments.”
The order states that Neely sold shares in a fraudulent real estate investment trust to investors in Missouri and three other states. Neely sold these fraudulent securities over an extended period of time while he was employed at Stifel and at another broker-dealer, AXA Advisors. However, AXA Advisors indicated that it had hired Neely because Neely’s Uniform Termination Notice of Securities Industry Registration (“Form U-5”), filed by Stifel, stated only that Neely had voluntarily ended his employment with Stifel. AXA signed a similar consent order in December 2010, and made whole all known AXA customers who lost money as a result of Neely’s criminal scheme.
As a result of its two-year investigation, the Securities Division concluded that while Neely was at Stifel and subject to the firm’s control and supervision, Stifel failed to detect and respond to a host of questionable activities or developments including: Neely’s outside business activities; his private securities transactions; client account distributions; and customer correspondence to Stifel regarding concerns about their accounts. The order also found that Stifel failed to timely produce records sought during the investigation and that Stifel failed to properly maintain required documents.
In addition to restitution, Stifel is required to pay $500,000 to the Missouri Investor Education and Protection Fund and $70,000 for the costs of the Securities Division’s investigation.
For more information regarding investments and fraud protection, or for information regarding a company or representative, visit the Secretary of State’s online Investor Protection Center at www.MissouriInvestorProtection.gov or call the toll free Investor Protection Hotline at 1-800-721-7996.
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