The scandal-plagued bank has agreed to pay a multimillion-dollar settlement to the SEC
.jpg)
Wells Fargo is unlimbering its checkbook again to pay yet another fine for improper conduct.
The banking giant has agreed to settle charges that it raked in big fees by “improperly encouraging” mom-and-pop investors to actively trade high-fee financial products that were intended to be held until they matured. The bank has agreed to pay a $4 million penalty to settle the charges. It will also have to return $930,377 in fees and $178,064 in interest, according to the Securities and Exchange Commission.
The SEC had accused the bank of misconduct in the sale of financial products known as market-linked investments, or MLIs. The products are designed to be held until maturity. However, Wells Fargo encouraged its clients to sell the MLIs early and invest the proceeds in new MLIs – a strategy that “generated substantial fees for Wells Fargo, which reduced the customers’ investment returns,” the SEC said.
The SEC also alleged that the Wells Fargo representatives involved didn’t “reasonably investigate or understand” the costs of the transactions, and that supervisors “routinely approved these transactions despite internal policies prohibiting short-term trading or ‘flipping’ of these products.”
“It is important that brokers do their homework before they recommend that their retail customers buy or sell complex structured products,” said Daniel Michael, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “The products sold by Wells Fargo came with high fees and commissions, which Wells Fargo should have taken into account before advising retail customers to sell their investments and reinvest the proceeds in similar products.
Wells Fargo neither admitted nor denied the SEC’s findings in the settlement.
Related stories:
Wells Fargo slashes more than 300 mortgage jobs
Wells Fargo's $142m fake-accounts settlement is finally official
