At Wells Fargo, there’s been a shocking, headline-making crisis of culture and ethics. At the Financial Industry Regulatory Authority’s dispute-resolution forum, there could be standing room only before long with furious Wells advisors filing arbitration claims that the firm’s scandalous sales practices have severely damaged their businesses.
So far, FAs aren’t lining up. But if the first advisors who have indeed brought such complaints prevail, the proverbial floodgates will inevitably open.
Two former Wells advisors, John L. Perry and Robin Johnson, filed a complaint this month alleging that their team practice suffered significant damage as a result of the bank’s misconduct. Perry reportedly argues that his business was down by half.
(Related: A Timeline of Wells Fargo’s Scandals)
With Wells’ wealth and investment management unit under investigation, safe to say it’s only a matter of time until the firm is even more deeply embroiled in scandal. The bank’s fraudulent cross-selling tactics extended from the bank to advisors working with their investment clients.
“That likely will be the next big shoe to drop at the firm,” says George C. Miller, securities attorney and partner in Shustak Reynolds in San Diego.
He is representing another Wells Fargo advisor pursuing arbitration who cites loss of business as a result of Wells’ ongoing woes.
Since the Los Angeles Times broke the news in 2013 about the bank’s misconduct, Wells Fargo has been fined multiple times, notably, $185 million for opening more than 3 million fake and unauthorized accounts; $2.09 billion for knowingly issuing bad mortgage loans repackaged as securities; and $1 billion for forcing customers into auto insurance they didn’t need.
The most recent penalty is a $65 million settlement following an investigation by the New York Attorney General’s Office into the firm’s misleading of investors by failing to disclose that its successful cross-selling was achieved through sales-practice misconduct.
The fraudulent sales practices were rooted in top management’s pressure on bankers to sell eight different Wells products to each customer. In 2016, the company fired 5,300 employees connected with the fake deposit and credit card accounts.
As for advisors Perry and Johnson’s arbitration, Wells holds that the conflict is a promissory-note dispute. “If an advisor leaves the company before fully repaying a promissory note, we use the FINRA dispute resolution process to collect,” a Wells Fargo spokesperson said in a statement to ThinkAdvisor. “This claim is an attempt to avoid repaying their obligations. We still intend to collect.”
Meantime, other Wells FAs are starting to come forward to file claims against the firm.
Miller’s client joined Wells “within days” of the announcement of major sanctions against the bank.
The lawyer has in fact heard from dozens of other current and former Wells advisors claiming that their practices have been substantially hurt by the firm’s bad behavior.
Further, the Chicago attorney representing Perry and Johnson, Andrew Stoltmann, reportedly has been contacted by more than 100 Wells advisors with similar grievances. He maintains a web page asking Wells advisors who say their business has been harmed to reach out to him.