Wells Fargo Clearing Services, LLC has agreed to pay a fine of $400,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From January 2017 to December 2018, the company failed to reasonably supervise a former registered representative who recommended to retail customers unsuitable, short-term trading of syndicate preferred stock, closed-end funds (CEFs), and medium-term notes (MTNs).
Wells Fargo Clearing Services failed to reasonably follow-up on identified red flags of the representative’s short-term trading of these products.
During the same period, the company failed to establish and maintain a reasonable supervisory system to assess whether its registered representatives recommended to retail customers short-term trades of syndicate preferred stocks and CEFs that were unsuitable.
At least 40 of the firm’s other representatives recommended that WFCS’ retail customers purchase syndicate preferred stocks and CEFs and then sell the positions within 180 days, causing the customers to sustain losses on these transactions while the representatives collected concessions and commissions.
The company allegedly violated FINRA Rules 3110(a) and (b), and 2010.
Wells Fargo Clearing Services has agreed to the imposition of the following sanctions:
- a censure;
- a $400,000 fine;
- restitution of $599,025.29 plus interest;
- disgorgement of $2,031,972.10 plus interest.
