Failure To Supervise Investor Attorneys

Are You An Investor Who Suffered Losses Because of Broker-Dealer Supervisory Failures?

FINRA Orders Wells Fargo Clearing To Pay Over $3M Following Allegedly Unsuitable Short-Term Trades

Shepherd Smith Edwards and Kantas Failure To Supervise Investor Attorneys (investorlawyers.com) represent clients who have sustained losses because a broker-dealer’s failure to supervise their registered representatives resulted in allegedly unsuitable recommendations or trades. If you suspect that your investment losses could have been avoided were it not for financial advisor misconduct or negligence, contact us today.

Recently, the Financial Industry Regulatory Authority (FINRA) ordered Wells Fargo Clearing Services to pay over $3M for failing to supervise a former registered representative and 40 other representatives’ allegedly unsuitable short-term trade recommendations involving closed-end funds (CEFs), syndicate preferred stocks, and medium-term notes (MTNs).

FINRA’s order notes that from January 2017 to February 2018, the firm purportedly did not reasonably follow up on red flags indicating something could be amiss nor did it have a reasonable supervisory system to evaluate the appropriateness of the CEF and syndicate preferred stock recommendations.

FINRA contends that at least 40 Wells Fargo Clearing Services representatives allegedly unsuitably recommended to retail investors these purchases and, also, that they sell the positions within 180 days. This purportedly led to customers sustaining losses on these transactions even as the financial advisors earned commissions and concessions. Wells Fargo was found to have allowed these recommendations.

MTNs, CEFs, and preferred stocks are generally held long-term. According to FINRA, whenever the Wells Fargo Clearing Services customers purchased any of these products, the firm earned a sales commission, part of which was shared with the registered representative involved.

In a number of instances, when customers would later sell the securities, the firm would charge them commissions, a cut of which their representative also received. FINRA said that when registered representatives recommend their purchase, earn a sales commission, and then recommend the security’s short-term sale, trading in these types of investments can potentially become abusive.

In addition to censure, Wells Fargo Clearing will pay a $400K fine, $599K of restitution with interest, and $2.031M of disgorgement along with interest. The firm says it has “enhanced” its supervisory system.

Why Work With Our Experienced Failure To Supervise Investor Attorney?

Proving broker-dealer negligence can be difficult. You want to work with knowledgeable failure-to-supervise lawyers who know how to recognize when this is a factor and can prove liability.

For over 30 years, Shepherd Smith Edwards and Kantas have been fighting for retail investors, retirees, high-net-worth individual investors, and institutional investors to recoup the damages they are owed by brokerage firms that enabled wrongful, unsuitable, or careless actions by their brokers.

Not having the proper supervisory measures in place can lead to investor losses that could otherwise have been avoided. If you are a victim of failure to supervise, you may be able to sue for damages.

But first, you need to determine whether you have grounds for a case. Even if regulatory charges have been filed against the broker-dealer, you may be able to file an individual lawsuit depending on what happened.

Call our Failure To Supervise Investor Attorneys at (800) 259-9010 or fill out this contact form.