Wells Fargo

Securities Cases: Anti-Money Laundering Violation Allegations Lead to $5.3M Fine Against ICFBCFS, Three Houston-Based Healthcare Executives are Accused of Falsifying Financial Information, and Pension Fund Accuses Wells Fargo of Holding Back Rebate Fees

Published on: May 18, 2018 | by Shepherd Smith Edwards & Kantas, LLP

ICFBCFS and Chardan Capital Markets Accused of Anti-Money Laundering

FINRA has fined the Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) $5.3M for “systemic anti-money laundering compliance failures.” The self-regulatory organization contends that when clearing and settling the liquidation of over 33 billion penny stock shares between 1/2013 and 9/2015, the firm did not have in place an anti-money laundering program that was reasonable enough to identify and report possibly suspect transactions, especially when penny stocks were involved. ICBCFS is settling the case without denying or admitting to the self-regulatory authority’s findings. It has, however, consented to an entry of the findings.

ICBCFS also agreed to pay an $860K penalty to settle a US Securities and Exchange Commission case alleging anti-money laundering violations and the failure to report billions of suspect penny stock sales.

Massachusetts Investigates Wells Fargo Advisers

Published on: March 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US state of Massachusetts is investigating Wells Fargo Advisors (WFC) over whether the firm engaged in unsuitable recommendations, inappropriate referrals, and other actions related to its sales of certain investment products to customers. The news of the probe comes after Wells Fargo disclosed that it was evaluating whether inappropriate recommendations and referrals were made related to 401(K) rollovers, alternative investments, and the referral of customers from its brokerage unit to its own investment and fiduciary services business.

Secretary of the Commonwealth William Galvin said it would examine Wells Fargo’s own internal probe and wants to make sure that Massachusetts investors who were impacted by “unsuitable recommendations” would be “made whole.” He noted that while moving investors toward wealth management accounts brings “more revenues to firms,” these accounts are “not suitable for all investors.”

As Barrons reports, referring clients to managed accounts tend to earn fee-based advisors significantly more. The article goes on to note that Galvin is looking into the use of managed accounts related to the US Department of Labor’s Fiduciary Rule, which includes best practices standards for the protection of consumers. The Massachusetts regulator recently referred to that same rule when the state became the first one to file such related charges in its case against Scottrade over sales contests. In that case, Galvin accused the broker-dealer of improper sales practices, including contests that offered incentives to agents who targeted retiree clients and prospective retiree clients in particular.

Securities News: Wells Fargo’s Wealth Management Division is Reportedly Under Investigation, Merrill Lynch is Accused of Gatekeeping Failures Involving Unregistered Securities Sales, and NYSE Must Pay $14M Over Regulatory Failures

Published on: March 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

SEC Reportedly Investigating Wells Fargo Over Possible Inappropriate Investment Sales to Wealth Management Clients

According to news reports, the US Securities and Exchange Commission is investigating Wells Fargo’s (WFC) Wealth Management unit to see whether its clients were inappropriately sold certain in-house investment services even though these were not in their best interests. A source told Bloomberg that the regulator’s role in the probe has not been publicly disclosed.

However, in a regulatory filing, Wells Fargo revealed that it is looking into whether inappropriate recommendations were made related to 401(k) plan rollovers, alternative investments, and brokerage customer referrals to the firm’s “investment and fiduciary-services business.” The bank noted that it was assessing these matters in its wealth management business in the wake of inquiries made by federal agencies.

Bloomberg notes that it was in 2015 that JPMorgan Chase & Co. (JPM) consented to pay $267M over allegations that its customers were not told that it had profited by placing their funds in certain hedge funds and mutual funds that charged particular fees.

Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud

Published on: February 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred Jeffrey Palish, an ex-Wells Fargo (WFC) broker in the wake of allegations of senior investor fraud. The regulator is accusing him of stealing over $180K from an elderly client with no plans or means of paying her back.

Palish was let go by the firm last year after an internal probe found that he had made misstatements about these transactions. He was arrested last week in New Jersey and charged with theft by deception involving over $75K.

According to prosecutors, Palish may have stolen at least $600K from elderly clients and failed to pay back a $100K loan from two clients. NorthJersey.com reports that Palish took clients’ money by selling their stock holdings and putting the funds from those sales into a bank account in which he deposited checks from clients. He also is accused of making more than three dozen unauthorized wire transfers of about $300K in total to pay his credit card bills.

Securities Fraud: FINRA Bars Two Ex-Wells Fargo Brokers Over Unsuitable Securities Sales, Pennsylvania-Registered Representative is Accused of $2.35M Ponzi Scam, and Digital Display Ad Company Allegedly Stole Over $2M from Retail Investors

Published on: December 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Wells Fargo Brokers Barred Over Unsuitable Energy Securities Sales
The Financial Industry Regulatory Authority has barred brokers Charles Lynch and Charles Frieda for making unsuitable recommendations to investors, resulting in substantial financial losses to the latter. Lynch and Frieda are former Wells Fargo (WFC) representatives who were based in Southern California. Both Lynch and Frida were fired from the firm. Previous to working at Wells Fargo, both men worked at Citigroup (C) and Morgan Stanley (MS).

According to the self-regulatory organization, between 11/12 and 10/15, the former brokers recommended an investment strategy revolving around certain speculative energy stocks to over 50 customers. These securities were volatile. Because investors became very concentrated in these energy securities, they were placed at risk of substantial losses.

FINRA contends that the two brokers did not do a proper job of making sure these investments were suitable for the customers to whom they were recommending these securities.

SEC Orders Wells Fargo Advisors to Pay $3.5M Penalty

Published on: November 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is ordering Wells Fargo & Co.’s (WFC) wealth management unit to pay $3.5M for alleged anti-money laundering reporting violations. Wells Fargo Advisors agreed to pay the penalty. It is settling the charges but without denying or admitting to the regulator’s findings.

According to the SEC, starting in early 2012, new bank managers started pressing compliance officials to cease in their submission of suspicious activity reports. The failure to file these SARs reports, or delay them, reportedly occurred 50 times in a little over a year and involved accounts for international customers who were previously named in such reports.

Federal law mandates that broker-dealers notify the U.S. Treasury Department’s Financial Crimes Enforcement Network about any transactions of at least $5K that they believe may involve illegal activity. The regulator blames a “new senior manager” that was hired in the brokerage firm’s compliance group and placed in charge of the anti-money laundering program.

California Extends Sanctions Imposed Against Wells Fargo Following More Bad Practice Disclosures

Published on: October 23, 2017 | by Shepherd Smith Edwards & Kantas, LLP

California Treasurer John Chiang announced this week that the state has decided to extend the sanctions it imposed against Wells Fargo & Co. (WFC) for one more year. The bank is barred from doing business with California in the wake of the sales practice scandal involving the set up of at least two million unauthorized credit card and bank accounts. Wells Fargo agreed to pay $185M to regulators to resolve related charges.

As the country’s largest municipal debt issuer, California oversees a $75B investment portfolio. Its sanctions include suspending the state’s investments in Wells Fargo Securities, barring the bank from being used as a brokerage firm to buy investments, and prohibiting it from serving as bond underwriter whenever Chiang is authorized to appoint said underwriter.

When explaining why he sought to extend the state’s sanctions, Chiang pointed to recent disclosures, including that Wells Fargo overcharged veterans in a federal mortgage-refinancing program and, in another program, made loan borrowers pay for unnecessary insurance. The state treasurer sent a letter to Wells Fargo’s board and its Chief Executive Tim Sloan noting that a number of demands have to be fulfilled before he will lift the sanctions.

Wells Fargo Brokerage Firms Ordered to Pay $3.4M Over Unsuitable Exchange-Traded Product Recommendations

Published on: October 16, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority said that Wells Fargo Advisors Financial Network and Wells Fargo Clearing Services LLC must pay over $3.4M in restitution to customers who were impacted by unsuitable recommendations involving exchange-traded products and the supervisory failures involved. By settling, Wells Fargo (WFC) is not denying or admitting to the regulator’s charges.

According to FINRA, between 7/1/200 and 5/1/2012, there were registered representatives at Wells Fargo (WFC) who recommended these volatility-linked ETPs without fully comprehending the investments’ features and risks. The self-regulatory organization also found that the broker-dealer did not put into place a supervisory system that was reasonable enough to properly supervise the ETP sales during the period at issue.

The regulator said that the brokers did not have reasonable grounds for recommending these ETPs to customers whose risk profiles and investment goals were considered moderate or conservative. The representatives are accused of making inappropriate recommendations about when to leave these positions in a “timely manner.”

FINRA Fines Wells Fargo $3.25M Over OTC Options Trading Reporting

Published on: June 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Wells Fargo Securities (WFC) to pay a $3.25M fine for inaccuracies and mistakes in its reporting for over-the-counter trades that took place between January 2008 and March 2017. The self-regulatory organization also has censured the firm.

According to FINRA, in 2008, Wells Fargo (WFC) reviewed its OTC options trading reporting procedures. It went on to set up systems for reporting these types of trades. However, the firm’s reporting system was never fully established.

Wells Fargo Securities did not actually start reporting OTC options trades until after the firm achieved self-clearing status in 2014. Even then, claims the SRO, Wells Fargo either did not report or was inaccurate when reporting quite a number of these trades.

Securities Fraud: Ex-Broker Gets Prison Sentence for $1.2M Elder Financial Fraud, Massachusetts Man Admits to Bilking Neighbors, & More Than Two Dozen 27 Parties Under Fire Over Alleged Stock Promotion Scams

Published on: April 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Wells Fargo and LPL Financial Broker Receives 41-Month Prison Term for Elder Financial Fraud
Robert N. Tricarico, an ex-broker for both Wells Fargo Advisors (WFC) and LPL Financial (LPLA), will serve 41 months behind bars and pay restitution of over $1.2M after he pleaded guilty to elder financial fraud. The Securities and Exchange Commission, which brought a civil case against Tricarico, has barred him from the securities industry.

Court documents note that from 1/2010 to 6/2013, Tricarico was the financial adviser for a sick and elderly investor. He misappropriated over $1.1M from her by writing a number of checks to himself without the client’s consent, misappropriated checks written to her, liquidated her coin collection, and used her funds for his own expenses.

He has also admitted to bilking two other victims of $20K when he falsely represented that their money would go toward a business venture. He kept their money for himself.