Wells Fargo and Banc of America Ordered by FINRA to Pay Customers More Than $3 Million for Unsuitable Sales of Floating-Rate Bank Loan Funds

FINRA, the Financial Industry Regulatory Authority announced that it fined two firms $2.15 million and ordered the firms to pay more than $3 million in restitution to customers for losses incurred from unsuitable sales of floating-rate bank loan funds. Floating-rate bank loan funds are mutual funds that generally invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment-grade. The funds are subject to significant credit risks and can also be illiquid.

FINRA ordered Wells Fargo Advisors, LLC, as successor for Wells Fargo Investments, LLC., to pay a fine of $1.25 million and to reimburse approximately $2 million in losses to 239 customers. FINRA ordered Merrill Lynch, Pierce, Fenner & Smith Incorporated, as successor for Banc of America Investment Services, Inc., to pay a fine of $900,000 and to reimburse approximately $1.1 million in losses to 214 customers.

FINRA found that Wells Fargo and Banc of America brokers recommended concentrated purchases of floating-rate bank loan funds to customers whose risk tolerance, investment objectives, and financial conditions were inconsistent with the risks and features of floating-rate loan funds. The customers were seeking to preserve principal, or had conservative risk tolerances, and brokers made recommendations to purchase floating-rate loan funds without having reasonable grounds to believe that the purchases were suitable for the customers. FINRA also found that the firms failed to instruct their sales forces regarding the unique risks and characteristics of the funds, and failed to reasonably supervise the sales of floating-rate bank loan funds.

FINRA's Vice President and Chief of Enforcement, Brad Bennett, said, "As investors continue to look for yield in a low-interest-rate environment, these actions should serve as a reminder that brokers and their firms need to ensure that investment recommendations are consistent with customers' investment objectives and risk tolerances. Wells Fargo and Banc of America allowed their brokers to sell floating-rate bank loan funds to investors for whom the positions were unsuitable, resulting in significant losses to many customers." Wells Fargo and Banc of America neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

If you have experienced a financial loss due to your broker/dealer or financial advisor's recommendations, call Soreide Law Group for a free consultation with an attorney on how to potentially recovery your investment at: 888-760-6552.