Despite a recent court setback, Stifel is vowing to keep fighting a landmark arbitration award it has deemed the single largest penalty “in FINRA history in a retail customer arbitration.”
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Stifel suffered a blow Friday when a magistrate judge recommended rejecting its bid for the dismissal of a $132.5 million award a Financial Industry Regulatory Authority arbitration panel saddled it with last March over a now-barred broker’s investment recommendations. Stifel had sought to have the award overturned in part on the grounds that one of the arbitrators who approved the amount had been biased by her work on a previous case arising from the same broker: Chuck Roberts, who had run the Stifel-affiliated CR Wealth Management Group in Miami and New York.
In a decision handed down Friday, magistrate judge Eduardo Sanchez for federal court in Southern Florida rejected Stifel’s arguments, finding the firm had not cleared the high bar for having arbitration decisions overturned.
Under the Federal Arbitration Act, Sanchez noted, there is a “heavy presumption in favor of confirming arbitration awards; therefore, a court’s confirmation of an arbitration award is usually routine or summary.”
Stifel remains undeterred. In a statement, a spokesperson for the company called the judge’s decision “just the first step of judicial review of a runaway arbitration award that resulted from a biased and unfair FINRA process.
“We believe the award cannot be sustained for multiple reasons as clearly laid out in our filings,” the spokesperson added.
Sanchez’s finding is merely a recommendation that will eventually be taken up by the federal court in Miami hearing the Stifel case. Stifel has until Feb. 20 to file a reply.
Alleged bias by an arbitrator in the $133 million Stifel penalty
In its May petition to have the award overturned, Stifel had called it the largest “in FINRA history in a retail customer arbitration.” [The largest, for $400 million, was handed down in 2009 in an electronics company’s claim against Credit Suisse.]
At the center of the dispute is an arbitrator named Stephanie Charny. Charny was one of three members of the FINRA panel that approved the $132.5 million penalty after hearing evidence that Stifel’s ex-broker Roberts had been making unsuitable recommendations of “structured notes,” a type of debt security that can offer high returns but also carries substantial risks and fees.
The claimants in that case — David, Sarah Lyn, Adam and Leah Jannetti — prevailed after the arbitration panel found that Stifel “had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to Claimants would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in damage.”
While working as an arbitrator on the Jannetti case, Charny was also serving on a separate panel hearing similar claims against Roberts and Stifel. That case resulted in a $14.3 million award in October 2024 to a pair of claimants named Louis and Elizabeth Deluca, who had also filed a complaint about Roberts’ recommendations of structured notes.
Stifel later asked the FINRA director of dispute resolution services to remove Charny from the Jannetti case, alleging a potential for bias. That request was turned down on procedural grounds.
In refusing to overturn the $132.5 million award in the Jannetti case, Judge Sanchez noted that Stifel had had many previous opportunities to object to Charny’s serving as an arbitrator on two substantially similar cases at the same time.
“In other words, to the extent Charny’s award in Deluca may have created a conflict in Jannetti, [Stifel] was aware of that ‘known potential’ conflict well before the Deluca award was issued … ” Sanchez wrote.
“Here, [Stifel] has not established that Charny had any actual conflict,” he added. “Instead, [Stifel] relies entirely on the Deluca award that was adverse to [Stifel] to infer that Charny was biased or partial …”
Jeffrey Erez, who represented the Jannettis and many other claimants against Stifel and Roberts, declined to comment.
Stifel owes interest on its unpaid penalty amount
While rejecting Stifel’s attempt to have the Jannetti award overturned, Sanchez added a little salt to the wound by finding that Stifel now owes interest on the still-unpaid penalty amount. At the same time, he declined to heed the claimants’ request that Stifel be required to pay an additional monetary penalty.
The bulk of the arbitration award in the Jannetti case — $79.5 million of the total — consisted of punitive damages. These are often meant to punish conduct that’s deemed grossly malicious or negligent and to deter defendants and others from committing the same violations again.
Stifel contended the large punitive award in the Jannetti case rested on an unsound legal footing. Judge Sanchez rejected those arguments.
Even as Stifel fights the nearly $133 million award in the Jannetti case, its costs stemming from Roberts’ recommendations of structured projects and other investments continue to grow. In December, Stifel agreed to pay $850,000 to settle a separate claim arising from Roberts’ time at the firm.
The total tab for settlements and arbitration awards resulting from his recommendations is now approaching $200 million. And the number is only likely to grow, with more than 20 complaints still pending against him and the firm.
FINRA banned Roberts from the industry in July following a barrage of customer complaints about his investment recommendations. He had resigned from Stifel about a month before.
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