The Financial Industry Regulatory Authority said that Wells Fargo Advisors Financial Network and Wells Fargo Clearing Services LLC must pay over $3.4M in restitution to customers who were impacted by unsuitable recommendations involving exchange-traded products and the supervisory failures involved. By settling, Wells Fargo (WFC) is not denying or admitting to the regulator’s charges.
According to FINRA, between 7/1/200 and 5/1/2012, there were registered representatives at Wells Fargo (WFC) who recommended these volatility-linked ETPs without fully comprehending the investments’ features and risks. The self-regulatory organization also found that the broker-dealer did not put into place a supervisory system that was reasonable enough to properly supervise the ETP sales during the period at issue.
The regulator said that the brokers did not have reasonable grounds for recommending these ETPs to customers whose risk profiles and investment goals were considered moderate or conservative. The representatives are accused of making inappropriate recommendations about when to leave these positions in a “timely manner.”