Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC were recently ordered to pay more than $3.4 million in restitutions for unsuitable recommendations and related supervisory failures.
According to the Financial Industry Regulatory Authority (FINRA), Wells Fargo brokers recommended that their customers invest in volatility-linked exchange-traded products (ETPs) between July 1, 2010 and May 1, 2012 without fully understanding the features and risks that came with those offerings.
During their investigation, FINRA revealed that Wells Fargo did not have a system in place to reasonably supervise solicited sales of ETPs at the time of the offenses.
“FINRA seeks restitution when customers have been harmed by a member firm’s misconduct,” stated Susan Schroeder, Executive Vice President of FINRA’s Department of Enforcement. “We also credit firms that proactively detect and correct issues prior to detection by FINRA, as Wells Fargo did in this matter. Firms soliciting sales of volatility ETPs should already be well aware of the unique risks that they pose – but FINRA’s Regulatory Notice 17-32 is intended to further educate the industry so that member firms can assess their own practices and take appropriate remedial action if necessary.”
Wells Fargo consented to the entry of FINRA’s findings, but neither admitted nor denied the charges in the settlement.
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