Finra arbitrators ordered Wells Fargo to pay a former McDonald’s franchise owner about $500,000 for mishandling options related to stock he owned in the company.
Norman H. Williams alleged that Wells Fargo Clearing Services Inc. — doing business as Wells Fargo Advisors — and firm broker Frederick Robert Hughes engaged in options trading between March and September 2020 that led to the sale of McDonald’s common stock shares that Williams wanted to retain.
The firm essentially sold calls on the McDonald’s shares rather than buying puts, depriving Williams of gains on the stock, said Williams’ attorney, Mark Krudys, owner of The Krudys Law Firm. In the April 11, 2022, statement of claim, Williams cited breach of contract and fiduciary duty, fraud and conversion, among other causes of action.
A three-person Financial Industry Regulatory Authority Inc. arbitration panel found Wells Fargo and Hughes jointly and severally liable and order them to pay $450,000 in compensatory damages and $25,000 in costs, according to the April 6 award. The arbitrators also added interest at 6% per year from April 4, 2022, until the award is paid. The award totaled about $500,000.
Williams sought an $800,000 award at the arbitration hearing. Hughes requested expungement of the incident from his BrokerCheck record, which the arbitrators denied.
Williams had accumulated 3,357 shares of McDonald’s common stock over a 43-year career at the fast food company. He worked at the firm’s headquarters in Chicago and later moved to Virginia, where he owned and operated five franchises around Hampton Roads. He is now retired.
“Mr. Williams hoped to hold his MCD Shares — which had accumulated large capital gains since he had first acquired them — until he died so that he could leave them as a legacy to his son, Mr. Williams' only child,” Williams statement of claim said. “The MCD Shares held great sentimental value to Mr. Williams and his son because they represented Mr. Williams' long career at McDonald's.”
McDonald’s stock bottomed out at the beginning of the Covid pandemic in March 2020. It then started to rebound, as franchises become profitable by relying on drive-thru sales.
But Williams missed out on the upswing because “Hughes and WFA embarked on an inexplicable course of options trading involving Mr. Williams' MCD Shares that ultimately caused Mr. Williams to lose his prized MCD Shares and his son's inheritance several months later, to incur substantial capital gains taxes that he never should have incurred, and to incur over $265,000 in direct, out-of-pocket monetary losses,” Williams’ claim states.
Krudys said the arbitration victory “was very gratifying” because Wells Fargo originally offered $10,000 to settle the case and was dismissive of the claim, he said.
“It was a home run,” Krudys said. “The client was ecstatic. We had a very astute [arbitration] panel.”
Wells Fargo denied the allegations, according to the arbitration award. A firm spokesperson declined to comment.
Firms announce recruits in Pennsylvania and Ohio as advisors head for new opportunities.
The first instinct of a surviving spouse is often to act fast. The advisor's job is to pump the brakes and hold the course
Utah RIA with $3.3B in AUM teams with WPCG and HGGC's Aspire Holdings platform in deal expected to close this month.
They say the offering hid two facts before the stock cratered nearly 70%.
Trustees maintain 2034 insolvency projection, but new research shows benefit cuts could cost many retirees more than $137,000 out of pocket.
As $84 trillion prepares to change hands, advisors who treat estate planning as peripheral are quietly building a sieve, not a book.
In volatile markets, the advisors who win aren't the ones with the best calls - they're the ones whose clients stay the course.
