In a recent settlement with FINRA, Wells Fargo Clearing Services, doing business as Wells Fargo Advisors, agreed to pay over $3 million in monetary penalties due to significant trading supervision shortfalls. This settlement highlights the importance of proper oversight in the financial industry and provides a potential avenue for affected investors to recover their losses.
Background of the Case
Between January 2017 and December 2018, a registered representative at Wells Fargo engaged in over 100 short-term transactions involving syndicate preferred stocks, closed-end funds (CEFs), and medium-term notes (MTNs). Many of these transactions resulted in losses for clients who sold the positions within 180 days of purchase. Despite warnings, the representative continued these unsuitable trading practices, leading to substantial client losses while generating significant commissions and sales concessions for the firm.
FINRA’s Findings
FINRA’s investigation revealed that Wells Fargo’s automated alert system was inadequate, only flagging short-term trades occurring within 90 days. This oversight allowed more than 1,200 transactions involving sales of products held between 91 and 180 days to go unchecked. As a result, Wells Fargo earned over $1.45 million in selling concessions and $316,000 in sales commissions from these transactions.
Restitution and Penalties
To rectify these shortcomings, Wells Fargo has implemented an enhanced trade review system and revised its supervisory procedures. The firm agreed to pay $599,025 in restitution to affected customers, a $400,000 fine, and disgorgement of $2,031,972.10 plus interest.
Steps for Investors to Recover Losses
If you were affected by Wells Fargo’s trading supervision shortfalls, you may be entitled to recover your losses. Here are some steps you can take:
- Review Your Account Statements: Check your account statements for any short-term transactions involving syndicate preferred stocks, CEFs, or MTNs during the specified period.
- Consult with a Securities Lawyer: A securities lawyer can help you understand your rights and determine if you have a valid claim for recovery.
- File a Claim: If you have a valid claim, your lawyer can assist you in filing a claim with FINRA or pursuing other legal avenues to recover your losses.
Conclusion
Wells Fargo’s recent settlement with FINRA underscores the importance of proper supervision in the financial industry. If you believe you were affected by these trading supervision shortfalls, it’s crucial to take action to recover your losses. Consulting with a securities lawyer can provide you with the guidance and support needed to navigate this process.