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Wells settles SEC charges

St. Louis, MO
06/25/2018
Fine Amount: 
$4,000,000
Penalty Type: 
Issued by: 

The SEC yesterday announced that Wells Fargo Advisors LLC agreed to settle charges of misconduct in the sale of financial products known as market-linked investments, or MLIs, to retail investors. According to the order, the SEC found that Wells Fargo generated large fees by improperly encouraging retail customers to actively trade the products, which were intended to be held to maturity. As described in the SEC’s order, 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 Wells Fargo representatives involved did not reasonably investigate or understand the significant costs of the recommendations. The SEC found that Wells Fargo supervisors routinely approved these transactions despite internal policies prohibiting short-term trading or “flipping” of the products.

Without admitting or denying the findings in the SEC’s order, Wells Fargo agreed to return $930,377 in fees to clients, plus $178,064 of interest, and to pay a $4 million penalty. Wells Fargo 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.

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