Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that broker-dealer(s), Wells Fargo Clearing Services, LLC (CRD # 19616) and Wells Fargo Advisors Financial Network, LLC (CRD # 11025) (hereinafter, collectively “Wells Fargo”) were recently sanctioned by FINRA’s Department of Enforcement. The sanction(s) occurred as a result of an investigation into their failure to supervise brokers who made unsuitable recommendations of securities. Accordingly, the Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Wells Fargo.
Registration Background for Wells Fargo
Wells Fargo Clearing Services, LLC is the successor in interest to several other FINRA member firms including Wells Fargo Advisors, LLC. It is headquartered in St Louis, MO and offers a range of broker dealer services. It currently has approximately 25,900 registered representatives and 6,230 branches.
FINRA’s Allegations against Wells Fargo
FINRA’s investigation led to Wells Fargo entering into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA on September 1, 2020. According to the AWC, Wells Fargo consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:
- “From January 2011 through August 2016 (the “Relevant Period”), Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC (together “Wells Fargo” or the “Firm”) failed to establish and maintain a supervisory system, and failed to enforce written supervisory procedures (“WSPs”), that were reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to switches from variable annuities to investment company products”;
- Specifically, “[d]uring the Relevant Period, several of Wells Fargo’s registered representatives recommended that customers surrender more than 50,000 variable annuities with a principal value of more than $5 billion”;
- “In spite of the WSPs’ directive that supervisors review the suitability of product switches, Wells Fargo failed to ensure that such reviews happened when its representatives recommended that customers switch from a variable annuity to an investment company product”;
- “During the Relevant Period, Wells Fargo’s registered representatives recommended at least 101 potentially unsuitable switches involving the sale of a variable annuity to purchase investment company products”;
- “Because Wells Fargo did not have an alert to flag switches from variable annuities to investment company products prior to August 2016, no qualified supervisor reviewed the switches to determine if they were suitable and based on customers’ financial needs and investment objectives”;
- By virtue of the above, Wells Fargo violated NASD Rule 3010 and FINRA Rule 3110, regarding supervision and FINRA Rule 2010, regarding standards of commercial honor and principles of trade.
As a result of such violations and in addition to the above described findings and conclusions, FINRA’s September 1, 2020 AWC also indicates that Wells Fargo consented to the following sanction(s):
For Wells Fargo Clearing Services, LLC:
- A censure; and
- A fine of $625,000.00 and
- Restitution to the customers in the amount of $1,355,499.19, plus interest.
For Wells Fargo Advisors Financial Network, LLC:
- A censure;
- A fine of $50,000.00; and
- Restitution in the total amount of $89,668.31, plus interest.
Wells Fargo has a History of Regulatory Actions
In addition to the findings of FINRA’s Department of Enforcement, FINRA BrokerCheck for Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC reveals both entities have a history of regulatory actions being brought against them, including but not limited to the following:
- On February 27, 2020, the Securities & Exchange Commission (SEC) brought administrative proceedings against Wells Fargo charging that it had violated sections of the Investment Advisers Act of 1940 by failing to reasonably fulfill its supervisory responsibilities. As a result, it agreed to the sanctions of censure, a fine in the amount of $35,000.00 and a cease and desist.
- January 29, 2020, Wells Fargo entered into an AWC with FINRA. Wells Fargo consented to the entry of findings that it failed to reasonably supervise a former registered representative who excessively traded equity positions of an elderly customer. As a result, it agreed to the sanctions of censure and a fine in the amount of $175,000.00.
- On March 11, 2019, the Securities & Exchange Commission (SEC) brought administrative proceedings against Wells Fargo charging that it had violated sections of the Investment Advisers Act of 1940 by failing to adequately disclose to its clients their conflicts of interest relating to its receipt of 12b-1 fees and its selection of mutual fund share classes that pay such fees. As a result, it agreed to the sanctions of censure, a disgorgement with interest in the amount of $17,363,847.29 and a cease and desist.
Wells Fargo has a History of Customer Initiated Arbitrations
In addition to the findings of FINRA’s Department of Enforcement, FINRA BrokerCheck for Wells Fargo Clearing Services, LLC and Wells Fargo Financial Advisors Network, LLC reveals both have a history of being named as a respondent in customer-initiated arbitrations, including but not necessarily limited to the following:
- On April 3, 2000, a customer initiated an arbitration against Wells Fargo. The customer alleged breach of fiduciary duty, misrepresentation, suitability and failure to supervise. The customer further alleged damages in the amount of $115,000.00. On June 4, 2001 a panel issued an award against Wells Fargo in the amount of $90,000.00.
- On April 3, 2000, a customer initiated an arbitration against Wells Fargo. The customer alleged breach of fiduciary duty, churning, misrepresentation and suitability. The customer further alleged damages in the amount of $300,000.00. On April 12, 2000 a panel issued an award against Wells Fargo in the amount of $23,076.00.
- On May 11, 2000, a customer initiated an arbitration against Wells Fargo. The customer alleged breach of fiduciary duty, negligence, misrepresentation, suitability and failure to supervise. The customer further alleged damages in the amount of $784,000.00. On April 12, 2000 a panel issued an award against Wells Fargo in the amount of $21,600.00.
- On May 22, 2000, a customer initiated an arbitration against Wells Fargo. The customer alleged breach of fiduciary duty, breach of contract, breach of contract, failure to supervise and negligence. The customer further alleged damages in the amount of $34,000.00. On January 22, 2002 a panel issued an award against Wells Fargo in the amount of $8,000.00.
If you or someone you know has or had a brokerage account with Wells Fargo Clearing Services, LLC and/or Wells Fargo Advisors, LLC and have concerns regarding losses in your investments or possible sales practice violations including fraud, you may be entitled to recover lost funds. The Law Office of Kevin J. Deloatch, Esq. has an extensive securities law practice and over 30 years of experience on Wall Street. Call today at (646) 792-2156 for a free consultation. The time to file your claim may be limited so you should call today to avoid delay.
