The US state of Massachusetts is investigating Wells Fargo Advisors (WFC) over whether the firm engaged in unsuitable recommendations, inappropriate referrals, and other actions related to its sales of certain investment products to customers. The news of the probe comes after Wells Fargo disclosed that it was evaluating whether inappropriate recommendations and referrals were made related to 401(K) rollovers, alternative investments, and the referral of customers from its brokerage unit to its own investment and fiduciary services business.
Secretary of the Commonwealth William Galvin said it would examine Wells Fargo’s own internal probe and wants to make sure that Massachusetts investors who were impacted by “unsuitable recommendations” would be “made whole.” He noted that while moving investors toward wealth management accounts brings “more revenues to firms,” these accounts are “not suitable for all investors.”
As Barrons reports, referring clients to managed accounts tend to earn fee-based advisors significantly more. The article goes on to note that Galvin is looking into the use of managed accounts related to the US Department of Labor’s Fiduciary Rule, which includes best practices standards for the protection of consumers. The Massachusetts regulator recently referred to that same rule when the state became the first one to file such related charges in its case against Scottrade over sales contests. In that case, Galvin accused the broker-dealer of improper sales practices, including contests that offered incentives to agents who targeted retiree clients and prospective retiree clients in particular.
Following the Scottrade probe, the Consumer Federation of America wrote to regulators pressing them to start enforcing the fiduciary rule, which the Justice Department has said it would hold back doing so as long as firms attempted to “diligently and in good faith comply” through a transition period that doesn’t end until 2019. The CFA’s letters were sent to the DOL, the Financial Institute Regulatory Authority, and state securities regulators.
Galvin is reportedly not the only regulator scrutinizing Wells Fargo over possible inappropriate sales recommendations. Bloomberg reports that according to a source, the SEC is also investigating the firm’s Wealth Management unit although the investigation has not been made public.
News of the Massachusetts regulator’s probe into Wells Fargo comes just days after Galvin’s office announced the discovery that MetLife (MET) owes pension payments to hundreds of retirees in the state. Secretary Galvin has notified them by letter that they are owed money.
MetLife Owes Pension Payments to Thousands of Massachusetts Retirees
Galvin’s Securities Division has been probing MetLife since the end of last year, which is when the latter disclosed that it hadn’t paid thousands of retirees because the company couldn’t find them. It had become the company’s duty to pay their pensions from previous employers. MetLife then gave Galvin’s office the retirees names.
The Massachusetts regulator noted that his office was investigating other firms that offer retirement payments, including Mass Mutual, Prudential, Principal Financial, and Transamerica.
Securities Fraud Attorneys
At Shepherd Smith Edwards and Kantas, our investor fraud lawyers represent retirees, senior investors, and other investors that have sustained losses due to the wrongful, negligent, or careful actions of financial firms and/or their brokers, investment advisers, and sales representatives. Contact our securities law firm today and ask to speak with one of our experienced elder financial fraud lawyers.
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