Filing seeks to pull bond-firm licenses

The licenses of St. Bernard Financial Services of Russellville and its top executive should be revoked or suspended for not properly supervising a broker who made unsuitable bond trades for the state, the Arkansas Securities Department says in a complaint filed against St. Bernard.

Steele Stephens, the broker who already has relinquished his securities license, is at the center of a federal case against former state Treasurer Martha Shoffner. Shoffner, who resigned last year, has been accused of taking at least $36,000 from Stephens and directing a large portion of the state’s bond business to him.

The jury in the case began deliberations Tuesday.

Stephens, who was given immunity by federal prosecutors to testify against Shoffner, acknowledged that he earned about $2.5 million in commissions from the bond trades between 2008 and 2012.

Stephens is not affiliated with investment firm Stephens Inc.

The Securities Department also is investigating Stephens over the “unsuitable” trades, although the department has not filed an official complaint, department Commissioner Heath Abshure said Tuesday.

Stephens sold or bought the governmental agency bonds for the state in 85 trades, many before the bonds’ maturity dates, the Securities Department claimed. The early trades resulted in St. Bernard charging the treasurer’s office $3.2 million in commissions, the Securities Department said. The amount charged was “much higher” than markups on similar trades in the same bonds during the same period, the Securities Department claimed.

The Securities Department’s complaint filed in February against St. Bernard and Robert Keenan, its chief executive officer, claims that Keenan and his firm did not properly supervise Stephens.

Keenan told the department in an interview that he was Stephens’ supervisor from 2009 to 2013, the entire time he was employed with St. Bernard, the complaint said.

St. Bernard has a written policy that prohibits all employees from engaging in unsuitable securities trading, the department said. Keenan also was required to conduct daily and monthly reviews to determine the suitability of securities being sold, according to the department’s complaint.

In his response to the Securities Department’s complaint, Keenan said the department had made no “ factual finding” that St. Bernard made any unsuitable trades.

“The evaluation of a securities trade must be evaluated as of the date of the trade and not based on speculation, market forces, unforeseen changes in fiscal or monetary policy or hindsight,” Keenan said in his response. The response also said that neither St. Bernard nor Keenan should be held responsible for any lies or subterfuge by Stephens.

Keenan did not return a phone call seeking comment about the department’s claims.

In January, Keenan filed a complaint against Abshure with the state Ethics Commission claiming Abshure was contacting St. Bernard clients “attempting to create investor complaints against St. Bernard.”

Keenan’s ethics complaint against Abshure also said Abshure “exerted great effort to increase the revenue [of the department], which provides direct benefits to [Abshure] in the way of increased salaries, name recognition and other benefits.”

The Securities Department began investigating Stephens “even before I knew the FBI was involved or that there were allegations of improper payments,” Abshure said.

“We have been talking with Mr. Stephens and his attorney and we’ll be working on an action [against Stephens],” Abshure said.

The Securities Department is limited in its authority. The department can take actions against Stephens’ license and could fine him up to $10,000 for each securities violation, Abshure said.

“Just because he voluntarily gave up his [securities] license, you can’t give up your license to avoid an enforcement action,” Abshure said.

The department also filed a complaint last month against William David Crain, a St. Bernard broker and branch manager. Crain refused to allow examiners from the Securities Department to enter his branch office to conduct an exam. The department ordered that Crain’s securities registration be suspended temporarily.