Wells Fargo Advisors Fined $500,000 for Unsuitable Sale of Structured Products | Cold Spring Advisory Group

Wells Fargo Advisors Fined $500,000 for Unsuitable Sale of Structured Products

August 7, 2015

The Financial Industry Regulatory Authority (FINRA) recently announced that Well Fargo Advisors has agreed to pay a $500,000 fine for the unsuitable sale of structured products known as “structured repackaged asset-backed trust securities” (STRATS.) In addition to the fine, Wells Fargo was ordered to pay $242,000 in restitution to 66 customers who lost money in these transactions. 

According to FINRA, the sales material distributed by Wells Fargo regarding STRATS did not disclose the fact that investors run the risk of incurring substantial losses in termination fees if the issuer redeems the securities. 

This is not the first time that structured products have resulted in considerable losses for investors. In 2011, UBS was ordered to pay $8.25 million in restitution to clients who purchased Principal Protection Notes issued by Lehman Brothers in  2008. 

FINRA alleged UBS misled investors regarding the “principal protection” component of the structured product failed to disclose to its customers that these notes were, in fact, unsecured obligations of Lehman Brothers. Lehman Brothers filed for bankruptcy several months later.