The Financial Industry Regulatory Authority has fined Wells Fargo Investments $2 million over unsuitable sales of reverse convertible securities by one broker to 21 customers, and for failing to provide discounts on sales charges on Unit Investment Trust transactions.

In settling FINRA’s fine, the bank is required to compensate customers who didn’t receive discounts on UIT transactions despite being eligible, and some customers who were unsuitably sold the reverse convertible securities.

As to why these events occurred, FINRA says it found that Wells Fargo “had insufficient systems and procedures” to monitor the sales of these products and to ensure appropriate discounts were applied.

Alongside the fine against the firm, the regulator has filed a complaint against Alfred Chi Chen, the former registered representative who allegedly made the unsuitable sales, as well as unauthorized trades in several customer accounts, including accounts of deceased customers.

Reverse convertibles are interest-bearing notes, in which the principal is at risk if an underlying asset falls below a set level during the term of the convertible or at repayment. FINRA says Chen recommended these to 21 clients, most of whom were elderly or had limited investment experience and low risk tolerance.

In concluding these settlements, Wells Fargo neither admitted nor denied the charges, but consented to the entry of FINRA's findings.