Wells Fargo Accused of Misconduct with Small Investors

Wells Fargo Accused of Misconduct with Small Investors

June 26, 2018         Written By Bill Hardekopf

Wells Fargo is taking another hit for the way it handled business in the past. The Securities and Exchanges Commission found that between 2009 and 2013, bank employees encouraged small investors to trade market-linked investments (MLIs) before they reached maturity. This reduced the returns for the investors and generated higher fees for the bank.

MLIs are designed to be held until maturity, but they can be traded before that time and converted into new MLIs. This comes at a high cost to the investor. Wells Fargo has internal policies that prevent “flipping” these products, but supervisors “routinely approved these transactions.”

Wells Fargo did not confirm or deny the SEC’s rulings, but they did agree to pay a $4 million penalty. They must also return $930,377 of ill-gotten gains, along with $178,064 in interest.

Daniel Michael, Chief of the Complex Financial Instruments Unit for the Enforcement Division, said, “It is important that brokers do their homework before they recommend that their retail customers buy or sell complex structured products.” These agreements come with high fees and commissions that should have been considered before pushing retailers to make a trade.

Wells Fargo has already decided to shut down 52 branches in the Midwest to reduce costs after a wave of scandals over the last year. This is part of a larger plan to close 800 branches by 2020.



The information contained within this article was accurate as of June 26, 2018. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


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About Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
View all posts by Bill Hardekopf
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