Wells Fargo bank branch in New York. (Photo: Bloomberg) A Wells Fargo bank branch in New York. (Photo: Bloomberg)

Massachusetts securities regulators have opened an investigation of Wells Fargo Advisors to better understand the extent of problems revealed by the bank a week ago.

Specifically, they aim to better grasp the extent of inappropriate referrals of brokerage clients to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations tied to 401(k) rollovers.

“Wells Fargo’s recent banking scandal, which involved opening bogus accounts for their customers, leads me to believe that where there is smoke, there’s fire,” said Commonwealth Secretary William Galvin, the state’s top securities regulator, in a statement. “I need to be assured that Massachusetts residents haven’t been burned by corporate greed.”

Wells Fargo Advisors includes about 14,500 registered representatives.

Galvin’s office adds that it is seeking both more details on the scope of Wells Fargo’s own review of issues within the wealth unit and “reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole.”

“I am aware that there has been a recent trend in the industry to push investors into wealth management accounts which may bring more revenues to the firm, but which are not suitable for all investors,” Galvin said. “Given the recent retirement savings crisis in America, referrals and recommendations involving 401(k) accounts should be closely scrutinized, in light of the Department of Labor’s fiduciary rule.”

Wells Fargo’s Review

In its latest 10-K filing with the Securities and Exchange Commission, the bank said it is looking into problematic fee calculations made by its wealth management unit, which affected fiduciary and custody accounts, and other matters.

The review is being conducted at the request of the Justice Department, according a report in The Wall Street Journal.

This news came one month after the Federal Reserve barred the bank from growing. The developments also are tied to other issues that have plagued the bank for the past 18 months or so concerning fraudulent sales practices within its retail bank.

“Just when you think it is over, it is not — there is always more to the story,” said recruiter Danny Sarch after the Fed’s move was announced.

For its part, the bank said in a statement that its 10-K disclosures “reflect our continued commitment to transparency, even when all of the information or the final outcome of a matter may not be known just yet. We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company.”

— Check out Wells Fargo Pushed by Nuns to Report on Its Ethical Lapses on ThinkAdvisor.