The Financial Industry Regulatory Authority (FINRA) has ordered Wells Fargo Advisors, LLC (Wells Fargo) to pay a $500,000 fine and $241,974.34 plus pre-judgment interest in restitution to customers for allegedly making unsuitable recommendations to customers to purchase structured repackaged asset-backed trust securities (STRATS).
From approximately 2005 to 2012, Wells Fargo made unsuitable STRATS recommendations to its retail customers, selling nearly $12 million worth of the complex structured products. According to FINRA, Wells Fargo failed to properly educate its registered representatives about the risks associated with STRATS and that the customers had the potential to suffer significant losses. FINRA also found that Wells Fargo’s internal-use STRATS brochures were not fair and balanced and neglected to provide an appropriate basis for evaluating the risks and therefore the suitability of the STRATS. Wells Fargo did not admit to or deny FINRA’s findings. Continue Reading