Stifel experienced a setback in court Friday when a magistrate judge recommended against overturning a roughly $133 million arbitration award tied to barred financial advisor Chuck A. Roberts.
The Financial Industry Regulatory Authority is arbitrating numerous customer disputes involving the former Stifel advisor, deciding one in March with a $132.5 million award over his investment recommendations — notably risky structured notes. FINRA barred Roberts from the industry in July after the broker refused to appear for on-the-record testimony.
In U.S. District Court in Miami, where Stifel is challenging the award, a magistrate judge last week recommended that another judge not vacate it. The case arises from a FINRA claim that the Jannetti family asserted against Stifel alleging breach of fiduciary duty, negligence, negligent supervision, fraud, breach of contract and a Florida securities law violation.
Stifel asked the court to vacate the entire arbitration award on multiple grounds concerning an arbitrator's purported partiality, or bias, in the case, and that if it declines to do so, that it vacate or modify the punitive damages and attorneys' fees awards, the opinion notes.
The asset manager has not established partiality, the judge wrote, among other reasons given for denying the motion to overturn or modify the arbitration award.
The judge also recommended in favor of the family's motion for post-award interest but denied their request for sanctions for Stifel's pursuing what they called a "frivolous" motion to vacate the award.
The parties have until Feb. 20 to file any written objections to the magistrate judge's report and recommendation to the U.S. district judge handling the case.
As of last month, Stifel's bills to compensate clients for complaints against Roberts, including the award to the Jannettis, had reached roughly $195 million, while pending customer disputes claiming tens of millions more in potential damages had yet to be decided.
AdvisorHub first reported the recommendation Sunday.
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