Finra censures and fines Wells Fargo $350,000
Regulator says the firm failed to supervise reps’ sales of risky energy securities
The Financial Industry Regulatory Authority Inc. has censured and fined Wells Fargo Clearing Services $350,000 for failing to supervise two of the firm’s brokers who sold risky energy securities.
Finra said that between November 2012 and October 2015, two former firm representatives, Charles Frieda and Charles Lynch, recommended that many of their customers invest “a substantial portion of their assets at Wells Fargo in four high-risk energy securities.”
Finra said that the brokers’ conduct “generated multiple red flags regarding overconcentration in their customers’ account that raised suitability concerns that Wells Fargo failed to reasonably investigate.”
The events took place at Wells Fargo Advisors, which merged with another of the firm’s broker-dealers and became Wells Fargo Clearing Services in November 2016.
In many cases, Finra said, customers of Frieda and Lynch had more than 50% of their liquid net worth tied up in energy-sector securities. Seventy of their customers lost a total of more than $10 million when prices of energy securities plummeted in 2014 and 2015.
Wells Fargo compensated 67 of those customers more than $9.7 million based on losses related to the four securities. Three customers were not compensated, and the firm will provide restitution to them in the amount of $201,498, plus interest, pursuant to Finra’s letter of acceptance, waiver and consent.
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