Tag Archives: ETP Loss

Wells Fargo Losses

If you suffered losses with Wells Fargo in unsuitable inverse ETFs, ETP investments or other investments that you understood to have only low to moderate risk, please call 1-866-817-0201 for a free and confidential consultation with an attorney.

Wells Fargo has agreed to pay $35 million to settle Securities and Exchange Commission charges that brokers at Wells Fargo Advisors and its Financial Network (FiNet) channel were allowed to unsuitably sell single-inverse exchange traded funds (ETFs).

Inverse ETFs use a variety of derivatives to allow a fund holder to profit from the decline of a market or index.

Wells paid $2.7 million in fines and restitution in 2012 for failing  to supervise sales of non-traditional ETFs, and agreed to fix its policies and procedures, but “significant shortcomings remained,” the SEC order said. 

FINRA, the regulator overseeing securities brokers, expelled Leonard Charles “Lenny” Kinsman in May 2020.  Kinsman was a broker for Wells Fargo in Staten Island, NY and failed to attend a regulatory hearing, thus failing to contest charges against him.  The charges stem from Kinsman misrepresenting the risk of investments and recommending investments that were unsuitable.  Prior to the regulatory action, his employers had paid approximately $1.3 million to settle investor claims of unsuitability and misrepresentation.

Wells FargoWells Fargo has previous issues with FINRA and suitability.  FINRA previously ordered Wells Fargo on Monday to pay investors $3.4 million after its advisers recommended “unsuitable” investments known as volatility-linked products that were “highly likely to lose value over time.”

Wells Fargo pushed its investors into these investments, volatility-linked ETPs, as hedges, to protect against a market downturn. In fact, these investments are unsuitable for such a strategy.  The investment are, in reality, “short-term trading products that degrade significantly over time,” regulators said, and “should not be used as part of a long-term buy-and-hold” strategy.  The recommendation of such unsuitable investments is a form of negligence, and could be seen as reckless enough to be considered fraud.

Volatility-linked ETPs are complex products that most investors do not understand and, as such, they rely upon their adviser, who should be a trained professional, to understand.   Certain Wells Fargo representatives mistakenly believed that the products could be used as a long-term hedge on their customers’ equity positions to help safeguard against a downturn in the market. In fact, volatility-linked ETPs are generally short-term trading products that degrade significantly over time and should not be used as part of a long-term buy-and-hold investment strategy.

FINRA issued Regulatory Notice 17-32 shortly after announcing the settlement with Wells Fargo to remind firms of their sales practice obligations relating to these products. Wells Fargo had previously been on notice to provide heightened supervision of complex products such as ETPs in Regulatory Notice 12-03, and were advised, along with all other brokerages, to assess the reasonableness of their own practices and supervision of these products.

FINRA found, “Wells Fargo failed to implement a reasonable system to supervise solicited sales of these products during the relevant time period.”  The complete news release of the FINRA action can be found at the following link.

Oil or Gas Investment Losses

Oil Stock IIJeffrey Pederson, P.C. helps investors determine if they have a right to recover investment losses in oil, gas or other investments.  Please call 1-866-817-0201 toll-free for a free and confidential consultation.

While brokers will unlikely blame the 2020 decline in energy investments on the coronavirus issues, the declines started in advance of the virus and the virus was only a small portion of the decline.

These investments have always been known to be speculative with a potential for large losses.  Heightened commissions or an inattention to risk drove brokers or adviser’s to inappropriately recommend such investments over the past few years.  The losses such investments suffered in 2020 is not first time oil and gas has gone into free-fall.  In fact, the oil and gas industry has suffered equal or greater shocks in the past decade.

In 2016, oil dropped to a price below $30 a barrel.  This happened again in 2020 when some oil futures fell below $0.  Many investors simply ignore their losses, believing that the loss is simply due to the market, without knowing that they may be entitled to a recovery.  Such individuals unnecessarily let their plans for retirement or other future plans go unfulfilled because of the financial loss they sustained.

In late 2014, countless oil, gas and other energy companies have filed for bankruptcy.  Many investors in these companies were illegally sold these investments by brokerage firms motivated by commissions paid by the investments.  Such investments can take many forms including, but not limited to, Master Limited Partnerships (MLPs), common stock, notes, bonds, mutual funds, and Exchange Traded Funds (ETFs).

Regulators have put brokers on notice that oil and gas exchange traded products, ETPs, should not be recommended to average investors.

In sum, these investments are and have always been inappropriately sold to investors looking for moderate investments or otherwise looking to fund retirement or retirement savings.  The investments are and have never been stable.  This was known or should have been known by brokers and investment advisors for years.  Recommendations of oil and gas investments to such moderate investors is motivated either by heightened commissions many of these investments pay or, in some cases, negligence.

The reason brokers continue to misrepresent these investments and recommend to people who do not want such risk is the commission paid.   These investments can pay a broker and brokerage 10 to 20 times the commission that the average stock transaction pays.

Investors in certain ETFs, such as Direxion or USO, may have been inappropriately invested in these historically speculative investments.  Please call to speak to an attorney about whether you are entitled to recovery.

We are also currently investigating investments into the following energy companies:Oil Stock

American Eagle, BPZ, Buccaneer, Clean Energy Fuels, Climax Energy, Duer Wagner, Earthstone, Ensign Energy Services, Exxon, Fiduciary Claymore, Genal Energy, Hart Resources, Hercules Offshore,  Matador, Milagro Oil and Gas, Noble Energy, Petrobras, Origin Energy, Quicksilver Resources, Sabine, Samson Resources, Sandridge Energy, SBM Offshore, Southern Pacific, Walter Energy and WBH Energy.

Additionally, we are looking at MLPs focusing on energy such as Goldman Sachs MLP (GMZ) or any of the Steelpath investments.

Oil and gas limited partnership losses can do more than take away the hard earned principal of investors, it can also create tax liabilities that the investor was not expecting.  The result is that the investor could lose more than invested.  The following link discusses the risks that in more detail.

Jeffrey Pederson has represented investors in Alabama, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Minnesota, Missouri, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.