FINRA Orders Wells Fargo to Pay $3.4M Over Volatility-Linked ETPs

Susan Schroeder, executive vice president of FINRA’s Department of Enforcement, said in a statement that FINRA “seeks restitution when customers have been harmed by a member firm’s misconduct,” adding that “We also credit firms that proactively detect and correct issues prior to detection by FINRA, as Wells Fargo did in this matter.”

Firms soliciting sales of volatility ETPs “should already be well aware of the unique risks that they pose – but FINRA’s Regulatory Notice 17-32 is intended to further educate the industry so that member firms can assess their own practices and take appropriate remedial action if necessary.”

FINRA also noted that firms should review its earlier guidance about heightened supervision of complex products set forth in Regulatory Notice 12-03.

According to FINRA’s order, Wells Fargo failed to implement “a reasonable system to supervise solicited sales of these products during the relevant time period. However, FINRA found that Wells Fargo took remedial action to correct its supervisory deficiencies in May 2012, prior to detection by FINRA and around the time that the firm was fined for similar violations relating to sales of leveraged and inverse ETPs.”

In addition, Wells Fargo provided “substantial assistance to FINRA’s investigation by, among other things, engaging a consulting firm to determine the appropriate restitution to be provided to affected customers,” the self-regulator said.

FINRA “took Wells Fargo’s previous corrective actions and cooperation into account when assessing the sanctions in this matter, and encourages member firms to assess their own sales and supervision of volatility ETPs.”

— Check out FINRA Plans BrokerCheck Changes, Remote Exams on ThinkAdvisor.