SEC orders Wells Fargo pay $35 million for recommendations of high-risk products

[Eugene]

Source: Reuters

BUSINESS NEWS FEBRUARY 27, 2020 / 4:43 PM / UPDATED 5 MINUTES AGO

SEC orders Wells Fargo pay $35 million for recommendations of high-risk products

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission said on Thursday it ordered Wells Fargo & Co to pay $35 million to settle charges it failed to adequately supervise investment advisers who were recommending high-risk products.

Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network failed to supervise investment advisers who recommended single-inverse exchange-traded funds (ETFs). The advisers recommended the investments to customers with conservative or moderate risk tolerances, including senior citizens and retirees, the SEC said in a filing.

The order comes just a week after Wells Fargo & Co agreed to a $3 billion deal with the regulator and the U.S. Department of Justice to resolve criminal charges over its fake-accounts scandal.

Wells Fargo did not admit or deny the SEC’s findings from Thursday’s order. The $35 million will be distributed to certain people who received the recommendations and suffered losses, the SEC said.

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Read more: https://www.reuters.com/article/us-wells-fargo-sec/sec-orders-wells-fargo-pay-35-million-for-recommendations-of-high-risk-products-idUSKCN20L35B

[progree]

1. I think even the funds themselves have this disclaimer or something like it

FINRA’s 2009 notice said that single-inverse ETFs were “not suitable for retail clients who plan to hold them for more than one trading session, particularly in volatile markets,” according to the order.

Inverse funds are designed to go up when the market goes down. Sadly, there will be DUers talking about buying these things, because they're savvy worldly-wise and all that (I've seen plenty of these posts over the past 15 years). But inverse funds have a poor record, even in down markets from articles I've seen in the AAII Journal and elsewhere (American Association of Individual Investors). I don't know how that can be, but please check out a fund's historic record before buying.