Wells Fargo Wins $ 3.1 Million in ITU Finra Exam Sweep


Wells Fargo Investments LLC has agreed to pay $ 3.1 million to settle charges for improper sales of reverse convertible securities and for failing to provide rebates on mutual fund (UIT) selling charges.

The San Francisco-based financial services firm’s penalty included $ 1.1. million dollars in customer restitution to settle the charges brought by the Financial Sector Regulatory Authority (Finra) without admitting or denying the allenations.

The settlement is one of six that Finra has reached with brokers as part of a five-year review of ITU practices that resulted in nearly $ 17 million in compensation being paid to 10,000 aggrieved customers.

Repeated renewals of ITU could generate commissions of up to 12.8% over two years, in addition to a 3.95% selling charge, Finra said. Trusts are generally designed to be held for 15 to 24 months, depending on the regulations.

Wells Fargo settled the charges without admitting or denying the findings. “As part of an industry-wide review of ITU Advance Bearings, Wells Fargo Advisors has improved the training and education of financial advisors and supervisors and enhanced its electronic liquidation monitoring system early in the ITU. payments to affected customers, with interest, ”Wells Fargo spokesperson Shea Leordeanu said.

In the most recent case, Finra said from July 2013 to June 2018. Wells Fargo did not have an automated system to detect when UITs were being renewed long before their due date, Finra said. During this period, Wells executed approximately $ 27 billion of ITU transactions for 123,000 accounts receivable, including approximately $ 1.8 of transactions in which ITUs were sold before their due date and, in some cases, used to purchase another ITU with a similar investment objective.

Finra initiated the scan of the first ITU rollovers after Morgan Stanley failed to reasonably oversee the first ITU rollovers in thousands of client accounts. The company agreed to pay $ 9.8 million in restitution and a fine of $ 3.25 million in 2017.

“This multi-year effort reflects FINRA’s commitment to proactively identify issues and compensate aggrieved investors,” Jessica Hopper, Finra’s law enforcement officer, said in a statement. “Companies should be especially vigilant in identifying representatives who recommend trading strategies designed to generate commissions for the representative regardless of the intended use of the product.”

In June 2021, Merrill Lynch, Pierce, Fenner & Smith agreed to pay $ 8.4 million in restitution to customers to settle charges they were billed in excessive selling charges on $ 32 billion in ITU sales. The company has also been accused of failing to supervise representatives who sold ITU clients $ 2.5 billion before their due date, resulting in additional charges.

These cases should also serve as a clear reminder to member companies to ensure that their systems “are reasonably designed to oversee the sales of any products they offer,” Hooper said.


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Shanta Harris

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