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Ex-Stifel Broker Loses FINRA Case Over Unauthorized Farm Loan

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An advisor fired by Stifel Financial (SF) nearly two years ago must pay some $440,000 to his former broker-dealer, a Financial Industry Regulatory Authority panel has ruled, for breaking the terms of his promissory note.

Christian Harkness, who worked for Stifel in La Crosse, Wisconsin, from September 2009 to December 2014, was let go due to “undisclosed business activities,” according to FINRA records. “During the [internal] review, the firm also learned the financial advisor failed to disclose a judgement and a loan with a client.”

As part of its disciplinary actions, which were finalized in November 2015, the regulatory group says Harkness twice borrowed money from one of the broker-dealer’s clients “without informing or obtaining prior written approval for the loans,” according to FINRA records.

FINRA stated that while the advisor was employed at UBS, he bought farmland from a client, paying with a $242,250 promissory note. Later, when employed by Stifel, Harkness executed with the client a loan modification of the balance he still owed “without informing or obtaining prior written approval for the loan modification from his firm,” FINRA said.

Harkness operated the farm with his client, according to the letter of acceptance he signed with FINRA in 2015.

Regulators said Harkness “falsely certified” that he had disclosed any loans from customers for five years. (For three of the five years, the advisor also lied about disclosing all outside business activities.)

In November, FINRA required Harkness to pay a $15,000 fine; he was suspended for nine months.

Harkness, who began work in the financial services industry in 1998 at Equitable Life, also has worked for AXA Advisors and Merrill Lynch (BAC) in addition to UBS (UBS).

He reached a settlement in 2010 and agreed to pay $100,000 in damages to a client who alleged the advisor had misrepresented and recommended an unsuitable investment related to a prepaid forward transaction entered into in November 2005, when Harkness was at Merrill. The client sought $1.35 million in damages.

On July 1, Stifel completed the sale of its Sterne Agee independent advisor business, which included 540 reps and $11.5 billion in client assets. Thus, as of July 1, Stifel has 2,298 advisors and $226 billion in client assets – which represents an average of about $98.5 million in client assets per advisor. Of its total advisor force, roughly 2,170 are employee reps and 130 are independent advisors.

Also last week, FINRA awarded Morgan Stanley (MS) over $550,000 in a judgement against Louis Dworsky, an advisor who left the firm in 2013.  Earlier, the wirehouse firm was ordered to pay $2.4 million to Dale Cebert, who was let go in 2014.