FINRA Sanctions Wells Fargo for Risky ETPs
According to reports on Monday, the Financial Industry Regulatory Authority (FINRA) ordered Wells Fargo & Co. to return $3.4 million to customers after selling them inappropriate investment products.
Wells Fargo brokers sold risky exchange-traded products (ETPs) to at least 1,300 affected customers with moderate and conservative risk profiles, from July 2010 to May 2012. The bank also failed to make sure brokers unloaded the products from customer accounts within 30 days, according to FINRA.
According to Investopedia, Exchange–traded products (ETP) are a type of security that is derivatively priced and trades intra-day on a national securities exchange. ETPs are priced so the value is derived from other investment instruments, such as a commodity, a currency, a share price or an interest rate.
Some Wells brokers mistakenly believed the ETPs could be used as long-term hedges against a market downturn, FINRA said. The products’ value reportedly shifted based on market volatility over short durations.
The bank also reportedly failed to implement procedures to ensure the products were sold only under certain circumstances, FINRA stated.
In May 2012, Wells Fargo identified the problem and began remediation efforts. They recently faced a separate penalty from FINRA for similar violations related to other types of ETPs.
According to the document, Wells Fargo did not admit or deny wrongdoing in reaching the settlement. Wells Fargo is the country’s third largest lender.
Recovery of Investment Losses
Brokerage firms are required to perform adequate due diligence on any product they recommend. They must ensure that all recommendations are suitable for their client in light of the client’s age, investment experience, net worth, income, and investment objectives.
If a brokerage firm fails to perform adequate due diligence or makes an unsuitable investment recommendation, the firm can be held responsible in a FINRA Arbitration claim.
If you suffered losses investing in Wells Fargo ETPs and would like to discuss your litigation options, please call The White Law Group at 888-637-5510 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on the firm and its representation of investors in FINRA arbitration claims, visit http://www.whitesecuritieslaw.com.