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FINRA Reviews Cross-Selling by 207 Ex-Advisors at Wells Fargo

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The Financial Industry Regulatory Authority confirmed Friday that it is looking into regulatory filings tied to at least 207 former employees of Wells Fargo Advisors who were dismissed for issues connected with its fraudulent accounts scandal.

“FINRA takes seriously the integrity and accuracy of all filings made by firms, including Form U-5s. With respect to Wells Fargo, we are reviewing the accuracy of filings made by the firm with regard to individuals involved in the cross-selling activities that are the subject of the CFPB action,” the regulatory organization said in a statement.

“We are also reviewing cross-selling activities across the industry as reflected in a sweep letter which is posted on our website,” it explained.

On Thursday, Sens. Elizabeth Warren, Ron Wyden and Bob Menendez asked Wells Fargo about its response to unauthorized accounts and its FINRA disclosures of details related to fake accounts; the bank has until Dec. 5 to reply. Wells Fargo has disclosed that some 5,300 employees were fired over their involvement in the scandal.

The apparent incomplete nature of the bank’s U-5 filings may have deprived regulators of details that might have helped them uncover and stop the “illegal activity” sooner, the senators argue.

In their letter, the senators say the bank filed close to 18,000 U-5 forms from 2011 to 2015 and that close to 20% — about 3,355 out of roughly 17,750 – were for employees listed as “discharged,” “permitted to resign” or “other” (which includes “failure to perform job duties”).

The senators explain that FINRA told them “slightly more than 600 of those 5,300 [fired] persons were registered at various times with [Wells Fargo Advisors …] between 2011 and early-2016, and … 207 of them were specifically terminated for issues that fall within the scope of the [$185 million Consumer Financial Protection Bureau] order.”

They also point out that of the remaining 400 FINRA-registered employees fired by Wells Fargo, it “is not clear if the bank filed U-5s at all.” FINRA staff told the senators that its review of the matter is “in its early stages” as it awaits further information from the bank.  

In their six-page letter to President & CEO Tim Sloan (which ends with 10 questions), the senators note that information recently obtained from FINRA “confirm that Wells Fargo had ample information about the scope of fraudulent sales practices occurring at the bank long before the CFPB settlement, and they raise additional questions about Wells Fargo’s response to this illegal activity.”

They also said, “If this is the case, then it would appear that Wells Fargo concealed key information from regulators that may have revealed the bank’s misdeeds long before the September 2016 settlement.”

Bank’s Response

Speaking on the matter in a statement, the bank said, “Wells Fargo takes its regulatory responsibilities seriously.” It also believes that politicians and regulators are most likely looking into issues involving licensed bankers, rather than financial advisors.

The ongoing attention on Wells Fargo “has most recently focused in part on licensed bankers that work in retail bank branches. Licensed bankers meet with bank customers and help identify their financial needs. These licensed bankers are employed by Wells Fargo’s retail bank and are required by FINRA to be licensed in order to carry out and be compensated for their activities. As such, Wells Fargo is required to notify FINRA when these team members are terminated or voluntarily leave Wells Fargo,” it stated.

In other news, Wells Fargo says it is sees possible litigation losses reaching up to $1.7 billion vs. its earlier estimate of $1 billion. It also has added the SEC to a list of agencies investigating its sales practices disclosures, according to regulatory filings.



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