As a result, they made inappropriate recommendations to certain clients to buy and hold these complex products for months or years. Many of their clients harmed by their investment recommendation practice were senior citizens and retirees who had limited income and net worth. Their clients collectively suffered millions of dollars of losses by holding their positions in single-inverse ETFs.
The Wells Fargo broker-dealers violated certain provisions of the Advisers Act, the Securities Act of 1933, and the Exchange Act by failing to adopt and implement policies and procedures to prevent unsuitable investment recommendation, failing to supervise its financial advisors, and failing to provide them with adequate training.
In a statement, SEC Enforcement Division Associate Director Antonia Chion said, “Firms must maintain [an] effective compliance and supervisory programs to ensure that the securities they recommend are suitable for their clients. As a result of Wells Fargo’s failure to meet these important obligations, some of its employees recommended complex instruments to retail investors who did not understand the risks involved.”
