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Clients to be reimbursed $40 million under SEC settlement with Wells Fargo

On Behalf of | Sep 6, 2023 | Financial News

Wells Fargo is reimbursing clients about $40 million after being charged by the Securities and Exchange Commission with imposing excessive advisory fees, according to a report in the Charlotte Observer.

The payments to affected account holders, which will include interest, are part of a settlement with the SEC that also includes a $35 million civil penalty.  Wells Fargo said it has conducted a thorough review of accounts and applied the reimbursements.

The SEC said that Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC overcharged nearly 11,000 investment advisory accounts more than $26.8 million in advisory fees.   The case involves certain clients who opened accounts prior to 2014 and were charged fees through the end of December 2022.

The SEC found that certain financial advisers from Wells Fargo and its predecessor firms agreed to reduce the firms’ standard, pre-set advisory fees for certain clients and made handwritten or typed changes on the clients’ investment advisory agreements reflecting the reduced fees when the accounts were opened.  But in some cases, the firm’s account processing employees failed to enter the agreed-upon reduced rates into the billing systems when setting up the accounts.

“Today’s enforcement action underscores the need for firms growing their businesses through acquisition to ensure that their growth does not come at the expense of client protection,” said Gurbir S. Grewal Director of the SEC’s Enforcement Division. “Investment advisers must adopt and implement policies and procedures to ensure that they honor their agreements with all of their clients, including legacy clients of predecessor firms.”

The SEC added that Wells Fargo failed to use compliance systems designed to ensure billing systems contained accurate data and didn’t effectively monitor that the bank was not overcharging clients.

The firm did not admit or deny the SEC’s charges, but consented to the entry of the finding that it violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 and agreed to a cease-and-desist order and censure.

Wells Fargo spokesperson Caroline Szyperski said the firm was pleased to have resolved the matter and added, “The process that caused this issue was corrected nearly a decade ago.”

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry.  If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form