Stifel Independent Advisors, Llc

Allegations: FINRA RULES 2010, 2111, NASD RULES 2310, 3010: THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TO RECOMMEND NONTRADITIONAL ETFS TO CERTAIN OF ITS CUSTOMERS WITHOUT ITS REPRESENTATIVES CONDUCTING ADEQUATE DUE DILIGENCE ON THE PRODUCTS. THE FIRM CONDUCTED DUE DILIGENCE REGARDING NONTRADITIONAL ETFS AND EMAILED TWO COMPLIANCE BULLETINS TO ITS REGISTERED PERSONNEL REGARDING THE FEATURES AND RISKS OF THE PRODUCTS. THE FIRM, HOWEVER, DID NOT PROVIDE ADEQUATE FORMAL TRAINING TO ITS REPRESENTATIVES AND SUPERVISORY PERSONNEL REGARDING THE UNIQUE FEATURES AND RISKS OF NONTRADITIONAL ETFS BEFORE PERMITTING THEM TO RECOMMEND THE PRODUCTS TO CUSTOMERS. CERTAIN CUSTOMERS WITH CONSERVATIVE INVESTMENT OBJECTIVES WHO BOUGHT ONE OR MORE NONTRADITIONAL ETFS BASED ON RECOMMENDATIONS MADE BY THE FIRM'S REGISTERED REPRESENTATIVES AND WHO HELD THOSE INVESTMENTS FOR LONGER PERIODS OF TIME EXPERIENCED NET LOSSES. THE FIRM FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM REGARDING NONTRADITIONAL ETFS, INCLUDING WRITTEN PROCEDURES REASONABLY DESIGNED TO ENSURE THAT THEIR SALES OF NONTRADITIONAL ETFS COMPLIED WITH APPLICABLE SECURITIES LAWS AND NASD AND FINRA RULES. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, IT IS CENSURED, FINED $100,000, AND ORDERED TO PAY $136,485.00 IN RESTITUTION TO 6 CUSTOMERS. Summary: SEE ITEM 12 B

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRMS CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THEY FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE A SUPERVISORY SYSTEM, INCLUDING WSPS, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THEIR SUITABILITY OBLIGATIONS IN CONNECTION WITH NON-TRADITIONAL EXCHANGE-TRADED PRODUCT (NT-ETP) TRANSACTIONS. THE FINDINGS STATED THAT ALTHOUGH THE FIRMS REVISED THEIR WSPS FOLLOWING A PREVIOUSLY ISSUED AWC, THE WSPS STILL FAILED TO PROVIDE REASONABLE GUIDANCE ABOUT HOW TO IDENTIFY AND ADDRESS POTENTIALLY UNSUITABLE NT-ETP RECOMMENDATIONS. THE WSPS DID NOT REQUIRE SUPERVISORS TO TAKE ANY ACTION TO ASSESS WHETHER NT-ETP RECOMMENDATIONS, INCLUDING RECOMMENDED EXIT OR HOLD STRATEGIES, WERE CONSISTENT WITH THE INTENDED HOLDING PERIODS IDENTIFIED IN THE PRODUCTS' PROSPECTUSES. IN ADDITION, THE FIRMS' SYSTEM FOR IDENTIFYING AND ADDRESSING POTENTIALLY UNSUITABLE NT-ETP RECOMMENDATIONS WAS NOT REASONABLY DESIGNED. IN RESPONSE TO THE PREVIOUS AWC, THE FIRMS IMPLEMENTED A NEW AUTOMATED ALERT THAT WAS DESIGNED TO FLAG, FOR SUPERVISORY REVIEW, ALL NT-ETP POSITIONS THAT HAD BEEN HELD FOR LONGER THAN 30 DAYS. HOWEVER, THE FIRMS ALMOST IMMEDIATELY DEACTIVATED THE ALERT AFTER IT RESULTED IN OVER 2,000 HITS PER DAY. EVEN AFTER THE FIRMS REACTIVATED THE ALERT, SUPERVISORS HAD BROAD DISCRETION TO RESOLVE THE ALERTS, BUT THE FIRMS DID NOT PROVIDE SUPERVISORS WITH ANY TRAINING ON HOW TO EVALUATE THE RED FLAGS PRESENTED BY THE LONG HOLDING PERIODS. AS A RESULT, SUPERVISORS ROUTINELY CLEARED THE 30-DAY HOLDING-PERIOD ALERTS WITHOUT ANY ANALYSIS OF THE SUITABILITY OF THE UNDERLYING NT-ETP RECOMMENDATIONS THAT LED TO THE ALERTS. FURTHER, IN RESPONSE TO DISCOVERING THAT REPRESENTATIVES WERE ROUTINELY RECOMMENDING LONG-TERM HOLDING PERIODS FOR NT-ETPS, THE FIRMS' COMPLIANCE DEPARTMENT INSTITUTED A CLEAN-UP EFFORT THAT INVOLVED TRACKING NT-ETP POSITIONS HELD FOR MORE THAN 30 CALENDAR DAYS AND ENCOURAGING (BUT NOT REQUIRING) SUPERVISORS TO SPEAK WITH REPRESENTATIVES AND CUSTOMERS ABOUT SELLING AGED POSITIONS. HOWEVER, THE CLEAN-UP WAS NOT SUFFICIENT IN CERTAIN INSTANCES TO PREVENT REPRESENTATIVES FROM CONTINUING TO RECOMMEND A STRATEGY OF BUYING AND THEN HOLDING THESE PRODUCTS FOR PERIODS WELL BEYOND THE PERIODS IDENTIFIED IN THE PRODUCTS' PROSPECTUSES. AS A RESULT OF THESE SUPERVISORY FAILURES, THE FIRMS FAILED TO DETECT OR ADDRESS HUNDREDS OF OCCASIONS IN WHICH THE FIRMS' REPRESENTATIVES RECOMMENDED THAT CUSTOMERS BUY AND THEN HOLD NT-ETPS FOR POTENTIALLY UNSUITABLE PERIODS. SOME OF THE AFFECTED CUSTOMERS WERE SENIORS, AND MANY HAD CONSERVATIVE INVESTMENT OBJECTIVES OR MODERATE RISK TOLERANCES. IN TOTAL, THE FIRMS' REPRESENTATIVES RECOMMENDED AT LEAST 438 DAILY-RESET NT-ETP POSITIONS THAT WERE HELD FOR MORE THAN SEVEN DAYS, AND 45 MONTHLY RESET NT-ETPS THAT WERE HELD FOR MORE THAN 60 DAYS. COLLECTIVELY, THESE TRANSACTIONS RESULTED IN REALIZED CUSTOMER LOSSES OF $1,289,937.17 IN ACCOUNTS WHICH INCLUDES $100,095.63 IN STIFEL INDEPENDENT ADVISORS ALLEGED CUSTOMER LOSSES. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $80,000, AND ORDERED TO PAY $100,095.63, PLUS INTEREST, IN RESTITUTION TO CUSTOMERS.