Wells Fargo Fined for Failing to Supervise Representative’s Excessive and Unsuitable Trading

Wells Fargo submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which they allegedly failed to supervise a registered representative who excessively and unsuitably traded in three trust accounts belonging to a senior customer in violation of NASD Rule 3010(a) and FINRA Rules 3110(a) and 2010.

Between March 2012 and March 2016, a Wells Fargo registered representative placed more than 2,000 trades in three trust accounts belonging to an 88-year-old customer. According to the FINRA findings, Wells Fargo used a computer program to identify red flags of unsuitable trading using risk-based criteria and the written supervisory procedures required the Firm to conduct customer interviews to address these red flags. The findings stated the program flagged the accounts for high velocity 40 times in which Wells Fargo failed to address. As a result of the excessive trading, the customer paid at least $300,000 in commissions and other fees. Following its investigation, the Firm discharged the registered representative responsible for the accounts.

Prior to December 1, 2014, NASD Rule 3010(a) required each member firm to “establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable NASD Rules.” From December 1, 2014 through the end of the Relevant Period, FINRA Rule 3110(a) required each member firm to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.”

Without admitting or denying FINRA’s findings, Wells Fargo was censured, fined $175,000 and paid $1 million in restitution to the customer.

Stockbrokers have been known to engage in many practices that may violate industry and firm rules, practices, and procedures.  In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system.  The implementation of these industry rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures.  If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from excessive, unsuitable trading, and/or other misconduct by their broker can file claims to recover damages against broker-dealers, like Wells Fargo, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.

Have you suffered losses in your Wells Fargo account due to excessive and unsuitable trading by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.  Mr. Pearce is accepting clients with valid claims against Wells Fargo stockbrokers who may have engaged in broker misconduct and caused investors’ losses.

The most important of investors’ rights is the right to be informed!  This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida.  For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues.  The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally!  Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

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