FINRA Sanctions Wells Fargo for Failure to Supervise VA Switches
According to the Financial Industry Regulatory Authority (FINRA) on September 2, 2020, Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network have agreed to pay more than $1.4 million in restitution, plus interest, to about 100 customers, as well as fines totaling $675,000, for failing to supervise recommendations that customers switch from variable annuities to other investments.
From January 2011 through August 2016, Wells Fargo allegedly failed to supervise the recommendations that customers sell a variable annuity and switch to other products such as mutual funds or unit investment trusts. At least 101 potentially unsuitable switches occurred, according to a press announcement.
FINRA said that Wells Fargo did not obtain sufficient data from variable annuity issuers to review the suitability of variable annuity surrenders and subsequent switches, including surrender fees, despite rules to the contrary.
The firm’s procedures also required them to automatically send switch letters to clients confirming their understanding of the transaction, as well as related risks and expenses. Apparently the firms did not have an alert to identify switches from variable annuities to other investments, according to FINRA, and the firms reportedly did not send switch letters to affected customers.
The two Wells Fargo firms consented to the entry of FINRA’s findings.
According to Investment News this week, in August 2016 the firms reportedly made changes to improve their supervision of switches involving variable annuities, including developing a switch alert to identify when the proceeds from a variable annuity liquidation are used to purchase an investment company product.
Filing a Complaint against your Brokerage Firm
For a client to truly benefit from investing in variable annuities, it is the long term that pays off. Sometimes a broker may entice his client to sell variable annuities to roll into another annuity for the sole purpose of collecting commissions. Not only does the client lose the income that they were receiving from the annuity that was sold, but they will have to pay a surrender fee as well as commissions on whatever product they are switching to.
If you feel you have been a victim of variable annuity switching, the attorneys at The White Law Group may be able to help you recover investment losses. Please call (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 Franklin, Tennessee.
For more information on The White Law Group and its representation of investors in FINRA arbitration claims, please visit https://www.whitesecuritieslaw.com.