Articles Posted in Wells Fargo

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.

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The Financial Industry Regulatory Authority has barred Jeffrey Palish, an ex-Wells Fargo (WFC) broker in the wake of allegations of senior investor fraud. The regulator is accusing him of stealing over $180K from an elderly client with no plans or means of paying her back.

Palish was let go by the firm last year after an internal probe found that he had made misstatements about these transactions. He was arrested last week in New Jersey and charged with theft by deception involving over $75K.

According to prosecutors, Parish may have stolen at least $600K from elderly clients and failed to pay back a $100K loan from two clients. NorthJersey.com reports that Palish took clients’ money by selling their stock holdings and putting the funds from those sales into a bank account in which he deposited checks from clients. He also is accused of making more than three dozen unauthorized wire transfers of about $300K in total to pay his credit card bills.

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Ex-Wells Fargo Brokers Barred Over Unsuitable Energy Securities Sales
The Financial Industry Regulatory Authority has barred brokers Charles Lynch and Charles Frieda for making unsuitable recommendations to investors, resulting in substantial financial losses to the latter. Lynch and Frieda are former Wells Fargo (WFC) representatives who were based in Southern California. Both Lynch and Frida were fired from the firm. Previous to working at Wells Fargo, both men worked at Citigroup (C) and Morgan Stanley (MS).

According to the self-regulatory organization, between 11/12 and 10/15, the former brokers recommended an investment strategy revolving around certain speculative energy stocks to over 50 customers. These securities were volatile. Because investors became very concentrated in these energy securities, they were placed at risk of substantial losses.

FINRA contends that the two brokers did not do a proper job of making sure these investments were suitable for the customers to whom they were recommending these securities.

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California Treasurer John Chiang announced this week that the state has decided to extend the sanctions it imposed against Wells Fargo & Co. (WFC) for one more year. The bank is barred from doing business with California in the wake of the sales practice scandal involving the set up of at least two million unauthorized credit card and bank accounts. Wells Fargo agreed to pay $185M to regulators to resolve related charges.

As the country’s largest municipal debt issuer, California oversees a $75B investment portfolio. Its sanctions include suspending the state’s investments in Wells Fargo Securities, barring the bank from being used as a brokerage firm to buy investments, and prohibiting it from serving as bond underwriter whenever Chiang is authorized to appoint said underwriter.

When explaining why he sought to extend the state’s sanctions, Chiang pointed to recent disclosures, including that Wells Fargo overcharged veterans in a federal mortgage-refinancing program and, in another program, made loan borrowers pay for unnecessary insurance. The state treasurer sent a letter to Wells Fargo’s board and its Chief Executive Tim Sloan noting that a number of demands have to be fulfilled before he will lift the sanctions.

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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.”

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The Financial Industry Regulatory Authority is ordering Wells Fargo Securities (WFC) to pay a $3.25M fine for inaccuracies and mistakes in its reporting for over-the-counter trades that took place between January 2008 and March 2017. The self-regulatory organization also has censured the firm.

According to FINRA, in 2008, Wells Fargo (WFC) reviewed its OTC options trading reporting procedures. It went on to set up systems for reporting these types of trades. However, the firm’s reporting system was never fully established.

Wells Fargo Securities did not actually start reporting OTC options trades until after the firm achieved self-clearing status in 2014. Even then, claims the SRO, Wells Fargo either did not report or was inaccurate when reporting quite a number of these trades.

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Former Wells Fargo and LPL Financial Broker Receives 41-Month Prison Term for Elder Financial Fraud
Robert N. Tricarico, an ex-broker for both Wells Fargo Advisors (WFC) and LPL Financial (LPLA), will serve 41 months behind bars and pay restitution of over $1.2M after he pleaded guilty to elder financial fraud. The Securities and Exchange Commission, which brought a civil case against Tricarico, has barred him from the securities industry.

Court documents note that from 1/2010 to 6/2013, Tricarico was the financial adviser for a sick and elderly investor. He misappropriated over $1.1M from her by writing a number of checks to himself without the client’s consent, misappropriated checks written to her, liquidated her coin collection, and used her funds for his own expenses.

He has also admitted to bilking two other victims of $20K when he falsely represented that their money would go toward a business venture. He kept their money for himself.

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A Financial Industry Regulatory Authority arbitration panel ruled that Wells Fargo Advisors (WFC) must pay investor Anthony J. Pryor $357K related to purportedly unsuitable housing and energy investments. In his securities fraud claim, Pryor alleged negligent misrepresentation, negligent supervision, breach of fiduciary, and other causes. Wells Fargo denies Pryor’s allegations.

His advisor, Jeff Wilson, who was not named as a party in the securities case, has three customer disputes on his BrokerCheck record. One of the other claims that was settled for $250K also allegedly involving unsuitable investments.

Unsuitable Investments
Not every investment is suitable for every investor. Some investments may too be risky for certain investors or are not in alignment with their investment goals or financial needs. For example, many older retail investors that are about to retire will likely require a more conservative investment plan that a much younger, single investor.

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This week, Prudential Financial Inc. (PRU) announced that is no longer distributing certain term life insurance policies, including its My Term product, through Wells Fargo’s (WFC) retail bank. The decision comes after Prudential employees filed a complaint claiming they were let go because they reported certain sales practices related to insurance policies. The insurer says it intends to probe the “full extent of abuses” that may have resulted from the Wells Fargo-related transactions. Prudential sold about 15,000 My Term accounts through the bank.

The employee lawsuit is Julie Han Broderick et al v. The Prudential Insurance Co. of America et al. The three plaintiffs, which include Han Broderick, Thomas Schreck, and Darron Smith, are seeking unspecified damages for wrongful termination. Prudential, however, claims that the reasons they were let go have nothing to do with its business with Wells Fargo but, rather, were related to an ethics complaint.

According to the NY Times, the ex-employees filed their complaint against Prudential and a regulatory officer, contending that they were let go as retaliation for their whistleblowing activities involving Wells Fargo’s allegedly fraudulent practices around the sales of My Term insurance policies. The plaintiffs, formerly supervisors in Prudential’s investigative division of its legal department, believe that this purported fraud was due to Wells Fargo cross-selling programs, which are now the subject of a number of lawsuits. They contend that they were fired go because they would not take part in Prudential’s alleged cover-up of the fraudulent and unlawful business practices it took part in and continues to engage in with Wells Fargo Bank.

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Ex-UBS Broker is Accused of Inflating Customer’s Account 
The Financial Industry Regulatory Authority has barred Jeffrey Hamilton Howell from the broker-dealer industry. The former broker is accused of giving  a customer bogus weekly account statements that overvalued an account by up to $3M. The alleged misconduct is said to have occurred between 9/2008 and 11/2014.
According to FINRA, Howell sent the customer over 300 Stock Tracking Reports that misstated the client’s portfolio in amounts ranging from $289K to approximately $3M. He purportedly used his personal e-mail to send the customer some of the fake reports. This left UBS with records and books that were not accurate.
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