Brokerage firm agrees to settle suit over excessive commissions for $340K

By Ann Maher | Feb 23, 2015

Madison County Treasurer Kurt Prenzler said Monday that an Arkansas brokerage firm has agreed to pay $340,000 to settle a suit filed in 2011 over excessive commissions charged by the company.

The agreement wraps up a complaint Prenzler filed with the Financial Industry Regulatory Authority (FINRA) against Sterne, Agee & Leach, claiming it charged as much as 1,239% more in average commissions for the same dollar amounts as was being charged by another broker who sold bonds to the county.

The matter had been set for an arbitration hearing in St. Louis on Tuesday.

"Sterne Agee’s broker engaged in blatant, self-serving conduct, and Sterne Agee did literally nothing to stop it, all of which was at the expense and to the detriment of the citizens of Madison County," stated County attorney Bruce Oakes of St. Louis in a pre-hearing brief.

"Charging an institutional investor such as Madison County these types of commissions was utterly outrageous and egregious."

In the suit, Prenzler claimed that Sterne broker Richard D. Holt of Hot Springs, Ark., who acted as a registered agent for Madison County’s brokerage account until December 2010, recommended numerous securities that exposed the county’s operating funds to risk, and which were in direct contravention to its investment policy.

“This settlement is a victory for Madison County and a vindication of my actions in regards to the purchase and sale of these bonds,” Prenzler said in a statement. “I feel the $340,000 is a good settlement, although there were several factors that made it difficult to get more.”

Oakes wrote that Sterne Agee argued that Madison County should not be permitted to recover for its claims because the County was too slow in filing its claim, and because Madison County failed to mitigate or otherwise reduce its damages.

"These defenses have no merit," Oakes wrote.

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