Stifel Ordered To Pay $14.3 Million Over Miami Broker’s Structured Note Strategy

Chuck A. Roberts, Stifel Financial Advisor

October 4, 2024

According to an arbitration award issued October 3, 2024, Stifel Financial has been ordered to pay almost $14.3 million in damages to two investors who alleged it failed to supervise Chuck Roberts, a Miami broker who recommended a flawed structured note strategy. 

“Structured Notes are very complicated, and are often sold to investors as a “low risk” or “conservative” when in fact they can be very risky at times,” said Jeffrey Sonn, Esq. a nationally known securities lawyer, not involved in the case. “We have had clients who were lead to believe their money was low risk, but only later learned that they were risky and lost a lot of money,” added Sonn.

According to the Finanical Regulatory Authority (FINRA), Structured notes- and structured products generally—are retail products designed or “structured” to meet specific investment objectives, such as growth, income or risk management. They do so by combining a traditional security, like a bond, with a derivative component. Importantly, a structured note doesn’t hold an actual underlying portfolio of investments like a mutual fund or exchange-trade fund (ETF) does. Instead, the issuer of the note promises to pay a return based on a formula that incorporates the performance of one or more reference assets. And, Most structured notes don’t offer any principal protection, meaning that an investor could lose the entire amount invested as a result of the performance of the reference asset or assets to which the notes provide exposure. 

“So, unless you have a 100% fully principal protected structured note, you are at risk of losing money, maybe even a lot of money contrary to what you were told by your financial advisor,” added Sonn.

There are many pending complaints on Chuck A. Roberts’ BrokerCheck record (www.brokercheck.com), reportedly related to the sale of structured products.

The investors who won the award, Louis and Elizabeth Deluca, asserted claims of breach of fiduciary duty, fraud and violation of the Florida Securities and Investor Protection Act. They asked the arbitration panel for $1 million and $5 million in compensatory damages for losses tied to the structured notes, plus punitive damages, meant to punish a defendant for outragious misconduct. Deluca asserted that the structured products strategy was designed to generate excessive commissions and improperly pitched as low risk. Financial advisor, Chuck Roberts, reportedly bought a $16 million home with his wife, model DJ Klaudie Roberts, who bought the home at 761 Button Lane in Bay Point, Miami, records show. The Roberts financed the purchase with an $11.2 million mortgage from Stifel Bank & Trust. 

The decision, issued by three public arbitrators, includes almost $4.1 million in compensatory damages split between the couple and their business, which is called UBS, Inc. but not related to the Swiss bank. The panel also ordered that Stifel pay them $9 million in punitive damages, $1.1 million in attorney fees and almost $146,000 in costs, according to the award. 

The FINRA arbitration panel denied Stifel’s request to “expunge” or erase the case that was reported on his brokercheck record. Roberts was not named as a party in the Deluca case.

Allegedly, the Deluca’s failure to supervise Chuck Roberts was supported by evidence that Roberts communicated with customers about the structured product strategies through an “unapproved” personal electronic device. The SEC has cracked down on broker dealers, including Stifel, for not supervising financial advisors’ communications on unapproved devices, and Stifel was ordered to pay a $35 million fine after an investigation by the SEC. See https://www.sec.gov/newsroom/press-releases/2024-144 .

Reportedly, a Stifel spokesperson said the firm disagreed with the FINRA award and plans to appeal the decision to a Court. “It is very difficult for a losing party to appeal and overturn a FINRA award,” said Jeff Sonn, Esq. “The law provides very limited reasons to challenge a FINRA verdict, and 99% of the time, those appeals are denied,” added Sonn.

Stifel, for its part, accused the Delucas of being “an extremely sophisticated client.” “In virtually every case I have handled over the last 36 years, broker dealers always accuse clients of being “extremely sophisticated” in an effort to shift the blame for investment losses to the clients of the firm,” said Sonn. “But I ask you, if all clients are “sophisticated investors,” why do we hire finanical advisors for their advice? The reality is that even wealthy successful investors are entitled to the truth from their “finanical advisor,” and client wealth is not a license to mislead or underreport the risk to your clients,” added Sonn.

Roberts leads the The CR Wealth Management Group, which is based in New York and Miami. His brokercheck report says he was employed as a financial advisor at Lehman Brothers, Painewebber, M. J. Whitman, and Oppenheimer & Co., Morgan Stanley’s Smith Barney and then in 2016, joined Stifel. 

Sonn Law Group PA represents individual, corporate and institional securities investors nationwide in FINRA arbitration, Court, and class actions involving structured products, stocks, bonds, private equity, private placements, hedge funds mutual funds and other cases, including Ponzi schemes. Cases handled on a contingency fee basis, no recovery, no fee. Please see Disclaimer. https://sonnlaw.com/disclaimer/#:~:text=All%20references%20to%20Sonn%20Law,client%20relationship%20has%20been%20established.