The U.S. Securities and Exchange Commission (SEC) stated Thursday it ordered Wells Fargo to pay $35 million to settle charges it did not adequately supervise funding advisers who were recommending high-risk products.
Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network did not supervise funding advisers who suggested single-inverse exchange-traded funds (ETFs). The advisers also suggested the investments to customers with conservative or reasonable risk tolerances, along with retirees and aged people, the SEC mentioned in a filing.
The order comes a week after Wells Fargo agreed upon sharing a $3 billion transaction with the regulator and the U.S. Justice Department to resolve criminal charges over its fake accounts scandal.
Wells Fargo didn’t admit or refuse the SEC’s findings from Thursday’s order. The $35 million will be distributed to sure people who received the suggestions and suffered losses, the SEC stated.
When asked to comment on the deal or costs, a spokesperson for Wells Fargo Advisors stated the agency no longer sells the products in the full-service brokerage.
The company’s policies weren’t reasonably meant to prevent and detect unsuitable recommendations of single-inverse ETFs from April 2012 to September 2019, the SEC stated. The suggestions came after Wells Fargo obtained a notice from the Financial Industry Regulatory Authority (FIRA) warning on sales activities for the unsafe products.
FINRA’s 2009 notice stated that single-inverse ETFs had been “not appropriate for retail purchasers who plan to hold them for multiple trading sessions, notably in risky markets,” based on the order.