Wells Fargo ETFs Result in $3.4 Million Fine

The Financial Industry Regulatory Authority Inc. (FINRA) has ordered Wells Fargo to pay more than $3.4 million in restitution to customers affected by unsuitable recommendations of Wells Fargo ETFs (exchange-traded funds).

Wells Fargo Failed to Supervise Brokers

FINRA found that Wells Fargo repeatedly failed to supervise brokers’ sales of volatility-linked ETFs and exchange-traded notes (ETNs). FINRA found that between July 1, 2010, and May 1, 2012, certain Wells Fargo brokers recommended volatility-linked ETFs and ETNs without having a comprehensive understanding of their risks and features.

FINRA’s found that certain Wells Fargo brokers mistakenly believed that the products could be used as a long-term hedge on their customers' equity positions in the event of a market downturn. But using the Wells Fargo ETFs and ETNs in that way is actually damaging to investors.

In addition, FINRA found that Wells Fargo failed to implement a system to supervise solicited sales of these products during the relevant time period, which could have stopped these ETF sales from happening.

Wells Fargo ETFs and ETNs Long Term

Volatility-linked exchange-traded products are meant to be used as short-term holdings that degrade significantly over time and should not be used as part of a long-term buy-and-hold investment strategy. Many brokers fail to understand that and, therefore, use the products inappropriately and also fail to advise their clients of the proper use of the ETFs and ETNs.

There have been numerous cases in the past several years of brokers and brokerage firms recommending ETFs and ETNs at the detriment of the customer. As a result, FINRA has issued several regulatory notices to remind firms of the proper sales practice obligations relating to these securities.

Have You Lost Money in ETFs that Wells Fargo Sold to You?

If you lost money in Wells Fargo ETFs or ETNs and you believe your broker did not properly explain the investments to you or misrepresented the risks of the products, you may have certain legal rights that require your immediate attention.

Call an Investment Fraud Attorney Today

If you are looking for an investment fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions. DKR has specifically recovered money for investors who were improperly sold risky ETFs.

With offices in Los AngelesNew YorkWest Palm Beach and Miami, our investment fraud attorneys represent clients nationwide and may be able to help you recover your investment losses.

Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. today to schedule an appointment or consultation to review your rights and options.

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