Wells Fargo to repurchase $94M in securities from family clients

A Finra arbitration panel has ordered the firm to buy back funds recommended by an adviser

Dec 27, 2013 @ 5:32 pm

By Trevor Hunnicutt

Wells Fargo & Co. must repurchase nearly $94 million in securities from the family of a deceased newsstand magnate who said their adviser misrepresented the investments, arbitrators ruled this week.

According to a ruling time-stamped Tuesday, a group of arbitrators impaneled by Wall Street's industry-funded watchdog, the Financial Industry Regulatory Authority Inc., ordered Wells Fargo Advisors to buy back at par, or face value, the municipal auction-rate securities it helped Robert B. Cohen, his family and an affiliated business buy since March 2008.

Mr. Cohen, who died last year, founded Hudson News, the chain of concession stores ubiquitous at U.S. airports and train stations. The family accused Wells Fargo and an adviser of fraudulent and misleading statements about the municipal auction-rate securities, according to Finra records.

Wells Fargo and its major competitors – UBS Wealth Management Americas, Merrill Lynch and Morgan Stanley – have bought back billions of dollars in auction-rate securities and agreed to millions in fines since 2008 to settle charges that they failed to properly supervise their advisers and inform investors about the debt securities.

Many investors found the long-term debts difficult to sell off when markets seized up during the financial crisis. But the Cohens claimed that an adviser told them they would enjoy relatively high rates of return and could earn back their money within months, according to regulatory records.

But the Finra arbitration panel stopped short of granting a request by the family for millions of dollars in other damages.

It also denied a request by the third-largest U.S. brokerage to have the dispute scrubbed from the regulatory records of Wayne, N.J.-based Wells Fargo adviser Timothy P. Shannon, against whom a case is still pending, according to regulatory records.

“We're disappointed in that decision, and we are reviewing it,” said Tony Mattera, a Wells Fargo spokesman. Mr. Shannon has previously denied the allegations.

Neither Wells Fargo nor the lawyer representing the investors immediately responded to a request for comment.

The Wall Street Journal first reported the award Friday afternoon.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

El-Erian warns advisers on ETF liquidity

If investors decide to exit exchange-traded funds en masse, things could get nasty, economist says.

Pass-through provision in new tax law could benefit REITs, MLPs

Investors in such instruments are eligible for a 20% tax deduction as a result of the pass-through provision.

Fidelity charging new fee on Vanguard assets held in 401(k) plans

The 0.05% fee is ostensibly a response to Vanguard's distribution model, but may also make the company's funds less attractive due to higher cost.

UBS adviser count continues to decline

Firm to merge U.S., global wealth management units on Feb. 1

TD Ameritrade launches all-night trading for ETFs

Twelve funds now can be traded after-hours, but the list will grow, company says.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print