Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC customers (together “Wells Fargo” or the “Firm”) who received recommendations to switch from variable annuities to investment company products. If you have lost money with Wells Fargo, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Wells Fargo and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on September 2, 2020, over allegations that between January 2011 and August 2016, Wells Fargo violated FINRA rules. Specifically, that Wells Fargo:
- Failed to establish and maintain a supervisory system, and failed to enforce written supervisory procedures (“WSPs”), that were reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to switches from variable annuities to investment company products (i.e., mutual funds, Unit Investment Trusts (UITs), etc.).
- The firm’s representatives recommended at least 101 potentially unsuitable switches that caused customers to incur over $1.4 million in unnecessary surrender fees (from surrendering the variable annuity) and upfront sales charges (associated with the purchase of the investment company product).
Prior to August 2016, Wells Fargo did not have an alert to flag switches from variable annuities to investment company products. As a result, no qualified supervisor reviewed the switches to determine if they were suitable and based on customers’ financial needs and investment objectives. Wells Fargo has since developed a switch alert to identify when the proceeds from a variable annuity liquidation are used to buy an investment company product.
As part of the AWC, Wells Fargo was censured and agreed to pay fines totaling $675,000. Wells Fargo also agreed to pay over $1.4 million, plus interest, in restitution to approximately 100 customers.
Wells Fargo Clearing Services, LLC is the successor to several FINRA member firms, including Wells Fargo Advisors, LLC. It has approximately 6,230 branch offices and 25,900 registered representatives. Wells Fargo Advisors Financial Network, LLC is under common control with Wells Fargo Clearing Services, LLC. It has approximately 703 branch offices and 2,045 registered representatives. Both Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC are headquartered in St. Louis, Missouri.
If you have lost money with Wells Fargo, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010.
What is a Variable Annuity?
A variable annuity is a contract between an investor and an insurance company, through which the insurance company makes periodic payments to the investor or a beneficiary designated by the investor. A variable annuity serves as an investment account that may grow on a tax-deferred basis, includes insurance features, and offers the investor periodic income payments. Variable annuities allow customers to choose from a complex array of contract features and investment options, including various share classes and optional riders. Each variable annuity is unique. The investor pays extra for the features offered by variable annuities.
Variable annuities can help investors meet retirement or other long-term goals. However, variable annuities are not suitable for all investors, especially for investors with short-term needs or objectives. Variable annuities are complex and can be costly due to fees or taxes and surrender charges that may apply if money is withdrawn early. Variable annuities also involve investment risks and include contract fees. Accordingly, financial advisors must exercise particular care to ensure that the purchase or exchange of variable annuity is suitable for a customer before recommending the product to a customer.
FINRA Rule 2111 requires that all investment recommendations be in the best interest of the customer. FINRA Rule 2330 provides investors with additional protections related to annuities. The rule requires that when a financial advisor recommends an exchange of a variable annuity, the financial advisor must consider whether the customer would incur a surrender charge, be subject to a new surrender period, lose existing benefits (such as death, living, or other contractual benefits), or be subject to increased fees or charges (such as mortality and expense fees, investment advisor fees, or charges for riders and similar product enhancements).
Prior Disciplinary History
On August 28, 2009, Wachovia Securities, LLC—which Wells Fargo Advisors, LLC had acquired in December 2008—executed an AWC through which it consented to findings that it violated NASD Rules 2110 and 3010 due to “supervisory failures regarding variable annuity sales” and having “had an inadequate system in place that would detect undisclosed switches.” FINRA fined the firm $350,000.
If you have lost money with Wells Fargo, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.