Wells Fargo Customers Get $3.4 Million in Restitution Over Sales Practices
- Wells Fargo consented to the order without admitting or denying the findings.
The Financial Industry Regulatory Authority (FINRA), the US securities industry's self-regulator, today said that it has fined Wells Fargo & Co $3.4 million over charges that it failed to educate and train its sales force about critical aspects of certain complex financial products it sold to investors.
FINRA found that Wells Fargo failed to implement policies to educate and train its registered representatives in connection with the sale of Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term-linked Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term-traded products (ETPs). The regulator added that due to the lack of adequate education and training, Wells Fargo brokers made false recommendations over the sale of ETPs to customers in light of their investment profiles.
The regulator pointed to some instances in which the bank’s financial advisors mistakenly believed that those complex products could be used as a long-term hedge on stock positions against a market downturn. But while investors have flocked to these exchange-traded products, the FINRA said that volatility-linked ETPs are short-term trading instruments that degrade significantly over time, making investors vulnerable to big losses if they hold on to them for too long.
Wells Fargo consented to the order without admitting or denying the findings.
FINRA also found that the lender did not adequately train its sales force to recognize the unsuitable product suite, and did not have a proper system in place to detect and unload the products from customer accounts within 30 days.
Susan Schroeder, executive VP of FINRA’s department of enforcement, commented: “FINRA seeks restitution when customers have been harmed by a member firm’s misconduct. We also credit firms that proactively detect and correct issues prior to detection by FINRA, as Wells Fargo did in this matter. Firms soliciting sales of volatility ETPs should already be well aware of the unique risks that they pose – but FINRA’s Regulatory Notice 17-32 is intended to further educate the industry so that member firms can assess their own practices and take appropriate remedial action if necessary.”
The Financial Industry Regulatory Authority (FINRA), the US securities industry's self-regulator, today said that it has fined Wells Fargo & Co $3.4 million over charges that it failed to educate and train its sales force about critical aspects of certain complex financial products it sold to investors.
FINRA found that Wells Fargo failed to implement policies to educate and train its registered representatives in connection with the sale of Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term-linked Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term-traded products (ETPs). The regulator added that due to the lack of adequate education and training, Wells Fargo brokers made false recommendations over the sale of ETPs to customers in light of their investment profiles.
The regulator pointed to some instances in which the bank’s financial advisors mistakenly believed that those complex products could be used as a long-term hedge on stock positions against a market downturn. But while investors have flocked to these exchange-traded products, the FINRA said that volatility-linked ETPs are short-term trading instruments that degrade significantly over time, making investors vulnerable to big losses if they hold on to them for too long.
Wells Fargo consented to the order without admitting or denying the findings.
FINRA also found that the lender did not adequately train its sales force to recognize the unsuitable product suite, and did not have a proper system in place to detect and unload the products from customer accounts within 30 days.
Susan Schroeder, executive VP of FINRA’s department of enforcement, commented: “FINRA seeks restitution when customers have been harmed by a member firm’s misconduct. We also credit firms that proactively detect and correct issues prior to detection by FINRA, as Wells Fargo did in this matter. Firms soliciting sales of volatility ETPs should already be well aware of the unique risks that they pose – but FINRA’s Regulatory Notice 17-32 is intended to further educate the industry so that member firms can assess their own practices and take appropriate remedial action if necessary.”