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Regulatory Sanctions

Customer Adlibs During Firm Inquiry Rather Than Use Broker’s Scripted Message

February 4, 2019

[Photo: Adlibs by Ueberschall /]


by Howard Haykin


A broker was terminated by Wells Fargo and suspended 8 months by FINRA after he made unsuitable recommendations to a senior customer, then provided a written script for her to use during an in-house inquiry.



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.