A FINRA arbitration panel ordered Stifel, Nicolaus & Company, Inc. to pay more than $1.5 million in damages for failing to properly supervise a Baltimore based financial advisor. Three customers of Kenneth Blumberg (CRD# 1585520), a financial advisor in Stifel’s Baltimore office, filed claims with FINRA. The customers allege breach of contract, professional negligence, breach of fiduciary duty, violation of Maryland and federal securities laws, and negligent supervision.
The arbitration proceeding, filed in December 2017, included the claims of eight additional customers of another Stifel broker and requested $38 million in damages. Those claims are now being brought in a separate proceeding because the customers discovered that the other broker was not Blumberg’s partner.
The claims against Blumberg pertain to his investment of approximately 80% of the Claimants’ portfolios in less than a dozen biotech and healthcare stocks. The customers alleged that Blumberg breached his fiduciary duty and violated state and federal securities laws by over concentrating the portfolios, executing trades without authority, and recommending unsuitability investment strategies. According to AdvisorHub, Blumberg mismarked trades as “unsolicited,” and encouraged the customers to “stay the course” and add to their positions as the portfolio began to lose value. The customers alleged that Stifel failed to adequately supervise Blumberg.
On October 3, 2019, panel of three arbitrators awarded the Claimants $1.5 million in damages. The award represented a full recovery of the approximately $1 million in losses in the account and $500,000 in consequential damages for lost gains. The FINRA panel imposed the entire award against Stifel but denied Blumberg’s request for expungement of the dispute from his BrokerCheck record.
If you believe that you have been misled by a financial advisor or wish to engage the services of a securities lawyer, please call the Costello Law Group at 410-832-800 (or Toll Free 877-418-0003) for a free consultation. Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud.