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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
In 2016, Wells Fargo made national headlines through an account fraud scandal in which employees created millions of fake bank accounts without the consent of customers. This scheme caused thousands of clients to rack up extra fees, simultaneously harming consumers’ credit scores. Despite being fined roughly $185 million, Wells Fargo is now entangled in yet another financial scandal. The company’s wealth-management division is currently under investigation for various violations of financial laws, including allegations of trade churning, charging excessive fees, and recommending unsuitable, high-risk investments. If you or a family member has been impacted, you may be able to recover compensation by filing a FINRA claim with assistance from a FINRA arbitration lawyer. Read on to learn more about the allegations against Wells Fargo – and how the Financial Industry Regulatory Authority could be able to help.
Wells Fargo Accused of Recommending Risky Investments, Charging Excessive Fees
Less than two years after being fined for generating millions of fake savings and checking accounts, Wells Fargo is once again embroiled in scandal – this time, stemming from a slew of wealth management tactics apparently designed to enrich the business at the expense of its customers. In two letters addressed to the U.S. Securities and Exchange Commission (SEC) – one sent from Arizona last year, the other from California in January 2018 – concerned financial advisors blew the whistle on their employer, spurring an investigation into alleged violations of investor disclosure laws.
According to the allegations, financial advisors employed by Wells Fargo recommended that clients – particularly those with substantial wealth –make risky investments in “alternative investments” that were majority-owned by the company. This practice allowed Wells Fargo to collect additional fees from clients, further padding the company’s profits.
These recommendations were motivated not by the goal of advancing clients’ best financial interests, but rather, to reach aggressive sales goals that would reward employees with hefty bonuses. When financial advisors deliberately make inappropriate investment recommendations in order to generate higher fees or commissions, it is known as “unsuitable investment advice” – and it constitutes a serious violation of federal financial laws enforced by agencies like the SEC and, under its regulation, FINRA. You should contact an experienced unsuitable investments attorney if you were pressured or deceived into making a high-risk investment by a financial advisor at Wells Fargo or other wealth management services.
Pushing clients toward risky investments was not the only way in which Wells Fargo financial advisors generated extra fees. In addition, the company allegedly used ambiguous fee agreements – which could, in some cases, allow employees to unilaterally make account changes, generating yet another wave of fees.
In addition to charging excessive fees and recommending inappropriate investments to various customers, some Wells Fargo employees may also have engaged in an unlawful practice known as “trade churning,” by which stockbrokers or investment advisors trade excessively in order to earn higher commissions. In the context of Wells Fargo, this practice appears to have peaked in 2015 – which employees dubbed “the year of the annuity” – during which financial advisors steered clients toward purchases of high-commission annuities. If this situation sounds familiar to you, you should discuss your legal options for pursuing compensation with a trade churning lawyer as soon as possible.
How FINRA Can Help Investment Fraud Victims
You likely noticed several references to FINRA while reading this article. But what is FINRA, and what does it have to do with the ongoing scandals at Wells Fargo?
FINRA, or the Financial Industry Regulatory Authority, is a private, SEC-regulated organization tasked with ensuring that brokerage firms and financial advisors are in compliance with federal laws that control the financial sector. When an advisor causes financial harm by violating these laws – for example, when an investor loses money because their financial advisor is engaged in trade churning – FINRA can provide a legal platform for the investor to seek compensation. For example, the investor can file a claim with FINRA to begin a process called “arbitration,” which is similar to litigation in court.
If upon reviewing the evidence, FINRA arbitrators determine that the investor was, in fact, a victim of fraud, they may award financial compensation to the investor. In addition, FINRA will penalize the broker or advisor who broke the law, generally by imposing fines and other sanctions.
FINRA Arbitration Lawyers Representing Investors Against Wells Fargo
FINRA arbitration gives victims the opportunity to seek justice and recover their financial losses. However, the process can be extremely complex, and the smallest of details – down to the individual arbitrators you select – are capable of making or breaking your claim. Therefore, it is crucial to be represented by an experienced, aggressive, and knowledgeable FINRA lawyer who understands how to build an effective legal strategy.
If you lost money because a financial advisor from Wells Fargo intentionally gave you poor investment advice, or deliberately mishandled your account, we encourage you to contact our FINRA attorneys for help. For a free legal consultation, contact Epperson & Greenidge LLP, or call (877) 445-9261 today.