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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