Wells Fargo Charged with Misconduct with MLI sales
According to a press announcement yesterday, the Securities and Exchange Commission charged Wells Fargo with allegedly generating large fees by improperly encouraging retail customers to actively trade market-linked investments, which were intended to be held to maturity.
The SEC alleged that the trading strategy – which involved selling the MLIs before maturity and investing the proceeds in new MLIs – generated substantial fees for Wells Fargo, which reduced the customers’ investment returns.
The order further found that the firm’s representatives involved did not reasonably investigate or understand the significant costs of the recommendations.
Further, the SEC found that Wells Fargo supervisors purportedly approved these transactions despite internal policies prohibiting short-term trading or “flipping” of the products.
Wells Fargo Advisors LLC reportedly agreed to settle charges of misconduct.
Without admitting or denying the findings in the SEC’s order, Wells Fargo agreed to return $930,377 of ill-gotten gains plus $178,064 of interest and to pay a $4 million penalty.
The firm also agreed to a censure and to cease and desist from committing or causing any violations and any future violations of certain antifraud provisions of the federal securities laws. The order recognizes that Wells Fargo took remedial steps to address the allegedly improper sales practices.
This information is provided to you by The White Law Group and is publicly available on the SEC’s website.
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