In anticipation of a new Department of Labor fiduciary rule to take effect June 9, Wells Fargo Advisors will prohibit the sale of structured products in IRA accounts.
In all, Wells Fargo will prohibit the sale of certain fixed income products—including reverse convertibles and structured products, preferred stock, international or unregistered debt, and private label mortgage-backed securities—and all municipal bonds to retirement accounts.
Wells Fargo's planned prohibition of reverse convertible sales in retirement accounts follows years of unsuitable recommendations of these and similar fee-laden products.
We obtained a FINRA arbitration award against Wells Fargo for losses in a senior citizen's retirement brokerage account related to Wells Fargo's sales of reverse convertible securities, and we have resolved several similar cases for harmed investors.
In June 2016, FINRA fined Merrill Lynch $5 million for negligent disclosure failures related to structured note sales, while in September 2016, UBS Financial Services agreed to pay $15 million to settle SEC charges that it failed to supervise, educate, and train staff regarding reverse convertible notes, including several Airbag and Trigger products.
As has been the case with some of Wells Fargo's reverse convertible and structured product sales, the SEC in 2016 found that UBS' deficiencies caused many investors to incur unwanted risk by investing in products—including reverse convertibles—with the potential for significant loss, which many of these unsophisticated investors had hoped to avoid by indicating their risk tolerance as "low" or investment profile as "conservative" on firm forms.
These moves come in the wake of the Department of Labor fiduciary rule's requirement that brokers act ias fiduciaries when providing investment advice related to their clients' retirement accounts. When FINRA and the SEC refused to act, the Department of Labor drafted a rule, took it through all the necessary rule-making hurdles, and finally implemented it over congressional and executive branch threats, to require brokers to act in the best interest of their client.
If you have invested with Wells Fargo Advisors or another firm in reverse convertibles or similar structured products that were unsuitable for your specific risk tolerance level or investment objectives, or whose recommendations were unclear, misleading, or omitted material facts and information that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.