Wells Fargo agreed to a $4 million fine, to return nearly $1 million in gains and pay $178,064 in interest as part of the settlement. File Photo by David Yee/UPI | License Photo
June 25 (UPI) -- Wells Fargo will pay $5.1 million to settle charges of financial misconduct, the Securities and Exchange Commission announced on Monday.
According to the SEC, Wells Fargo generated large fees by improperly encouraging retail customers to actively trade market-linked investments, which were intended to be held to maturity. The strategy required that the MLIs be traded before they matured and the proceeds be invested in new MLIs, which generated substantial fees for Wells Fargo while reducing customers' investment returns.
In addition, the SEC found that Wells Fargo did not properly investigate employees who were engaged in the practice and supervisors systematically approved the transactions, despite internal policies prohibiting similar practices.
"It is important that brokers do their homework before they recommend that their retail customers buy or sell complex structured products," said Daniel Michael, chief of the SEC's Enforcement Division's Complex Financial Instruments Unit. "The products sold by Wells Fargo came with high fees and commissions, which Wells Fargo should have taken into account before advising retail customers to sell their investments and reinvest the proceeds in similar products."
The SEC said Wells Fargo will pay a $4 million fine and agreed to return $930,377 in "ill-gotten gains," plus $178,064 in interest.
Wells Fargo agreed to the settlement without confirming or denying the SEC's accusations.
"We are committed to helping our clients achieve their investment goals and cooperated fully with the SEC's investigation," Shea Leordeanu, a Wells Fargo spokeswoman, said in statement to Bloomberg. "We previously made policy and supervision changes related to this matter to improve internal controls."
The settlement is the latest in a string of regulatory and public relations missteps in recent months. In April, the bank agreed to pay $1 billion for various abuses; last month, it was ordered to pay nearly $100 million over unpaid employee breaks; and last year settled a lawsuit that said it overcharged U.S. veterans for home loans. The bank has also agreed to pay hundreds of millions over a fake account scam involving more than 5,000 employees, who were ultimately fired.