The Financial Industry Regulatory Authority announced Tuesday that it had fined Wells Fargo Advisors and Merrill Lynch a total of $2.15 million and ordered the firms to pay more than $3 million in restitution to customers for losses incurred from unsuitable sales of floating-rate bank loan funds from 2007 to 2008.
FINRA ordered Wells Fargo Advisors, the successor firm for Wells Fargo Investments, to pay a fine of $1.25 million and to reimburse approximately $2 million in losses to 239 customers, while Merrill Lynch, a successor of Banc of America Investments, was ordered to pay a fine of $900,000 and to reimburse approximately $1.1 million in losses to 214 customers.
Wells Fargo and Bank of America neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Floating-rate bank loan funds are mutual funds that generally invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment grade. The funds, FINRA says, are subject to significant credit risks and can also be illiquid.
FINRA found that Wells Fargo and Bank of America brokers recommended concentrated purchases of floating-rate bank loan funds to customers whose risk tolerance, investment objectives and financial conditions were inconsistent with the risks and features of floating-rate loan funds.