Wells Fargo Advisors Settles Investment Sales Case

Tom Burroughes

27 June 2018

Wells Fargo Advisors, whose parent firm is reportedly examining an overhaul of wealth management business, has agreed to settle misconduct charges relating to how it sold certain investments to retail clients.

The , which reduced the customers’ investment returns. The SEC also found that Wells Fargo representatives involved did not “reasonably investigate or understand the significant costs of the recommendations”. The SEC found that Wells Fargo supervisors routinely approved these transactions despite internal policies prohibiting short-term trading or “flipping” of the products, it said.

The affair adds to other compliance and misconduct issues at one of the largest US banks. In April this year, it agreed to pay $1 billion to settle claims with US authorities over deficiencies in its risk management. The authorities have been looking at its wealth management operation, having discovered that its sales staff had opened as many as 3.5 million accounts without clients' knowledge. Last week, this publication reported the bank as saying that “no final decision” had been reached on restructuring its wealth management arm. It is understood that Abbot Downing, the part of the bank handling ultra-high net worth clients, is not affected by any such changes if they occur.

The SEC’s investigation was conducted by Emily A Rothblatt, Michael D. Wells, and Ana D Petrovic, and supervised by Jeffrey A Shank. The SEC’s examination that led to the investigation was conducted by Jennifer L Spicher and Christopher L Caprio and supervised by John T Brodersen and Daniel Gregus.