The SEC, Securities and Exchange Commission, has charged Wells Fargo Advisors with misconduct in the sale of MLIs to retail investors. MLIs are known as market-linked investments. This financial misconduct has imposed substantial costs on retail customers.
Without admitting or denying the findings in the SEC’s order, Wells Fargo has agreed to settle and return the ill-gotten gains as well as pay a penalty.
The following article illustrates how important it is for brokers to do their homework and be held accountable before they make recommendations to their retail customers.
Wells Fargo Advisors Settles SEC Charges for Improper Sales of Complex Financial Products
Misconduct Imposed Substantial Costs on Retail Customers
The Securities and Exchange Commission today announced that Wells Fargo Advisors LLC agreed to settle charges of misconduct in the sale of financial products known as market-linked investments, or MLIs, to retail investors.
According to the order, the SEC found that Wells Fargo generated large fees by improperly encouraging retail customers to actively trade the products, which were intended to be held to maturity. As described in the SEC’s order, the trading strategy – which involved selling the MLIs before maturity and investing the proceeds in new MLIs – generated substantial fees for Wells Fargo, which reduced the customers’ investment returns.
The order further found that the 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. Read Full article here.
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