Massachusetts Regulator Fines Former Stifel Nicolaus Adviser for Overcharging Clients
The Massachusetts Securities Division has charged a Cape Cod investment adviser with operating a scheme which overcharged his clients and diverted commissions and fees to Missouri-based broker-dealer Stifel, Nicolaus & Company and one of its local representatives.
The Massachusetts Securities Division has charged a Cape Cod investment adviser with operating a scheme which overcharged his clients and diverted commissions and fees to Missouri-based broker-dealer Stifel, Nicolaus & Company and one of its local representatives.
Francis Weller, Jr. and his company Weller Asset Management are charged with violating their fiduciary duty to act in their clients’ best interest and failing to disclose conflicts of interest.
The complaint claims that Weller had an arrangement since 2009 with Stifel, Nicolaus and one of the firm’s representatives, where he utilized Stifel’s resources in exchange for his clients’ business.
Specifically, Weller required all of his advisory clients to open trading accounts with Stifel, and the firm’s local representative received full-service commissions for his stock recommendations. Clients were also assessed management fees by Weller.
Stifel, Nicolaus & Company has agreed to settle with the Massachusetts Securities Division on related charges regarding its alleged failure to supervise its representative.
“Investment advisers have a duty to act in the best interest of their clients,” said Massachusetts Secretary of the Commonwealth, William Galvin. “By running this scheme, this adviser was allowing his clients to be overcharged for the benefit of his own business interests.”
Between 2012 and 2017, Weller’s clients paid in excess of $1 million in commissions to Stifel and its representative, while also paying hundreds of thousands of dollars to Weller in advisory fees, the complaint states.
“Essentially, [Weller Asset Management] clients were overpaying for services they could have received elsewhere at a much lower cost,” the complaint says.
According to the complaint, Weller never disclosed the arrangement to his clients, despite being required by state regulations to disclose any material conflicts of interest in writing, before providing any investment advice.
The Securities Division is seeking censure, a cease and desist order, revocation of Weller’s registration as an investment adviser in Massachusetts, disgorgement of profits received from wrongdoing, and an administrative fine.
In a separate consent order, Stifel, Nicolaus & Company agreed to a fine of $300,000 and to cease and desist from conduct in violation of the Massachusetts Securities Act. The firm will also be censured and hire a consultant to review all trades made under the arrangement with Weller. If any such trades are found by the consultant to be unsuitable, the firm agrees to make offers of remuneration to the clients.
