Wells Fargo Advisors was fined $4 million by the Securities and Exchange Commission (SEC) after the wirehouse allegedly encouraged its clients to actively trade market-linked investments (MLIs) from 2009 to 2013. MLIs are bonds whose performance is tied to an underlying asset or index, such as a stock or the S&P 500, and typically mature between one to five years after their initial issuance. Investors generally hold the securities until maturity. The SEC claims that Wells Fargo encouraged its clients to sell their MLIs before their maturity date and invest the proceeds in new MLIs, generating fees for the brokerage firm and hurting investors' returns. ‘The SEC found that Wells Fargo supervisors routinely approved these transactions despite internal policies prohibiting short-term trading or “flipping” of the products,’ the Commission said in a statement. ‘We are committed to helping our clients achieve their investment goals and cooperated fully with the SEC’s investigation,’ a Wells Fargo Advisors spokeswoman said in a statement. ‘We previously made policy and supervision changes related to this matter to improve internal controls.’ Wells Fargo will be required to return $930,377 in ill-gotten gains from the trades and $178,064 in interest, on top of the fine. The firm did not admit or deny the SEC’s findings as part of the settlement. ‘It is important that brokers do their homework before they recommend that their retail customers buy or sell complex structured products,’ said SEC enforcement division complex financial instruments unit chief Daniel Michael in a statement. ‘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.’ In March, federal investigators are reportedly planning to combine its Wealth Brokerage Services and Private Client Group divisions.
SEC has been fined 178,064 by Wells Fargo ( the US Securities and Exchange Commission ) over encouraging the active trading of market-linked investments (MLIs) between one to five years . The SEC claimed Wells Fargo recommended to clients that they sell the products before their maturity date and then invest the funds in new MLIs, thereby generating brokerage fees and diminishing investors' returns. In addition to the fine the firm will be required to return $ 930,377 from the trades, plus interest of $ 178,064 . Wells Fargo neither admitted nor denied the SEC 's conclusions as part of the settlement.