Tag Archives: NY broker fraud

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.

Anthony Vincent Ferrone securities violations

If you have suffered securities losses with Anthony Vincent Ferrone, formerly of Morgan Stanley, Ameriprise and Stifel Nicolaus, please call 1-866-817-0201 for a free and confidential consultation with a private attorney.   We believe that investors may be entitled to recovery for securities losses based upon recent actions concerning allegations of securities violations.

NYSE pic 2In July 2017, Mr. Ferrone was barred by FINRA from the securities industry.  The reason was because of his refusal to give complete testimony in a regulatory investigation concerning allegations that he sold investors unsuitable investments.

Unsuitable investments are investments recommended by a broker that are too aggressive or otherwise consistent with the investment objectives of an investor.  It can also mean any investment where a broker puts his personal compensation ahead of those of his investors.  Investors sold unsuitable investments are entitled to damages from the broker and the broker’s employer.

This is a recent event in a history of events concerning alleged mismanagement of funds and other red flags as to Mr. Ferrone’s ability to act as a broker.  Ferrone has four other allegations of mismanagement by investors, which are largely based on suitability issues.

Although Ferrone appeared for the FINRA investigation review on June 21, 2017, he did not provide complete testimony to FINRA. Specifically, during the review, Ferrone stated that he did not intend to proceed further on that date or at any future date and departed prior to the completion of his testimony.