Wells Fargo has agreed to pay more than $3.4 million to customers to settle a regulator’s claims that brokers recommended certain investment products they did not fully understand.
On Monday, the Financial Industry Regulatory Authority also cited Wells Fargo for failing to adequately supervise sales of the volatility-linked exchange-traded products. According to FINRA, the complex products are generally used for short-term trading and shouldn’t be part of a long-term investment strategy. But some Wells brokers mistakenly believed they could be a long-term hedge against equity positions in the event of a market downturn, the regulator said.
Wells Fargo did not admit or deny the charges.
In a statement, Wells said it cooperated fully with FINRA and has made “significant” policy and supervision changes, including discontinuing sales of the exchange-traded products at issue.
“We are committed to helping our clients achieve their investment goals through advice that is regularly reviewed and aligned to their objectives and risk tolerances,” the company said.
It’s the latest instance of Wells Fargo being faulted for sales practices.
In September 2016, the bank agreed to pay $185 million in fines to settle claims its employees opened more than 2 million deposit and credit card accounts that may not have been authorized by consumers. Since then, Wells has disclosed missteps involving other products, such as auto insurance and mortgages.
The settlement announced Monday centered on practices by Wells Fargo Advisors, the company’s national retail brokerage business, and covered a period from July 2010 to May 2012.
FINRA noted that Wells took action to correct its supervisory deficiencies in May 2012, before the regulator detected problems and around the time Wells was fined for similar violations involving sales of other ETPs.
The regulator also lauded Wells Fargo for providing “substantial” assistance to FINRA’s investigation by, among other things, relying on a consulting firm to determine appropriate restitution for affected customers.