Published by Financial Advisor IQ
October 12, 2016
Allegations of improper cross-selling methods at Wells Fargo continue to spread into its advisor business following the retail bank’s settlement with and subsequent grilling by regulators. One law firm has launched an investigation into whether cross-selling practices at Wells Fargo Advisors broke Finra rules.
Securities law firm Klayman & Toskes, which represents retail and institutional investors, says it’s looking into possible Finra violations at Wells Fargo Advisors similar to the allegations reported last week in the Charlotte Observer.
The Observer was approached by several former clients and a former manager at Wells Fargo Advisors who said aggressive cross-selling tactics similar to the ones at the bank’s retail division were also in place at the brokerage, as reported previously. Questions about Wells Fargo Advisors’ practices followed revelations that over 5,000 employees in the bank’s retail banking division had opened 2 million fake accounts, which resulted in a $190 million settlement with regulators, as reported previously.
Klayman & Toskes is investigating whether Wells Fargo Advisors engaged in unsuitable recommendations, misrepresentations and omissions of material facts, failure to supervise and breach of fiduciary duty, the law firm says in a press release.
The investigation zeroes in on whether Wells Fargo retail customers were pressured into opening investment accounts with the brokerage arm through high-pressure incentivized sales practices, Klayman & Toskes says in its release. The firm’s founder, Lawrence Klayman, says investors’ rights may have been violated and led to unsuitable recommendations, all at a time when the bank boasted of its cross-selling prowess publicly to shareholders. The law firm has put out a call to investors for information about the brokerage’s sales practices.
Wells Fargo, meanwhile, is now facing a federal class-action lawsuit filed in Minnesota, local ABC affiliate KSTP reports.
The suit alleges that the bank’s executives — who were at fault for the “criminal epidemic” that resulted in the creation of two million fake accounts, according to the suit — also endangered Wells Fargo employees’ retirement plans, the television news’s website writes. Adam Levitt, an attorney with Grant & Eisenhofer, says his law firm’s suit will seek damages tied to losses in the employees’ retirement accounts that were allegedly “largely tied to Wells Fargo stock,” KSTP.com writes.
Finra Suspends and Fines former Wells Fargo advisor
In other news, Finra has suspended a former Wells Fargo advisor who allegedly failed to follow the company’s verification procedures when she transferred $350,000 from a customer account to a fraudster, the regulator says.
Wells Fargo Advisors Financial Network fired Kathleen Kincade in January, after she was apparently duped in a phishing scam by an imposter who had hacked a client’s email account. Kincade has said that she had received verbal verification from the client when in fact she hadn’t, according to the regulator.
Wells Fargo was able to reverse one of the three transfers and reimbursed the client for the remaining funds, Finra says.
Kincade received a 30-day suspension and a $5,000 fine, according to the regulator.
By Alex Padalka