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

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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.

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