BROWSE BY TOPIC
- Investments - Private
- Investor Protection
- Investments - Strategies
- Investments - Unsuitable
- Bad Advisors
- Bad Brokers
- Boiler Rooms
- Regulatory Sanctions
- Wall Street News
- Rules & Regulations
- Terminations/Cost Cutting
- Compliance Concepts
- General News
- Donald Trump & Co.
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Customer Adlibs During Firm Inquiry Rather Than Use Broker’s Scripted Message
[Photo: Adlibs by Ueberschall / kvraudio.com]
by Howard Haykin
A veteran broker with 30 years’ experience, including 5 years with Wells Fargo Advisors Financial Network, made unsuitable recommendations to a senior customer resulting in short-term switches between Unit Investment Trusts ("UlTs") and Class A-share mutual funds (“MFs”), products designed to be held for the long-term.
- In April of 2015, the customer was directed to invest $545,000 in bond UITs (paying mark-ups of between 3.5-3.8%).
- In July 2015, as the UITs declined in value, the customer was directed sell the UITs for $506,000 and reinvest the proceeds in Class A-shares of 3 equity-based mutual funds issued by 3 different mutual fund families (paying up-front sales charges of between 2.7-3%).
- Within ten months, as the mutual funds declined in value, the customer was directed to sell all of the mutual funds for $420,000 and reinvest the proceeds in bond UITs that were similar to the ones sold in April 2015 (again paying up-front sales charges of between 3.5-3.8%).
- All told, the customer paid over $34,000 in excessive commissions.
MF SALES TRIGGERED AN ALERT. The sale of the Class-A mutual fund shares, less than a year after purchase, triggered an alert in Wells Fargo's supervision system, which prompted a direct supervisor to question the broker on his recommendations to sell the MFs and buy the bond UITs. The broker responded that the customer was fully informed of the costs associated with the transactions, and his supervisor said he would contact the customer and verify the broker’s response.
Ahead of the supervisor's call, the broker provided his customer with a written script of how he wanted her to respond to the expected questions from his supervisor. He also stated falsely that his supervisor was going to contact the customer because of her age. Much of the information contained in that script was false, including that the customer was aware of the commissions charged. In May 2016, when the direct supervisor called, the customer opted not to read from the script and instead told the supervisor that she was not aware of the commissions charged in her account. She further said that the broker had provided her with a statement to read to the firm, and that the statement was false.
FIRM SETTLES WITH CUSTOMER. Wells Fargo promptly entered into a settlement with the customer, paying her $34,480 – the amount of overcharged commissions. Oddly enough, Wells Fargo did not U5 the broker until October 2016, 5 months later.
This case was reported in FINRA Disciplinary Actions for November 2018.
For details the case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2016051750001.