Wells Fargo & Former Rep Boris Niko

Soreide Law Group has filed a FINRA arbitration on behalf of our client (Claimant) against:

WELLS FARGO CLEARING SERVICES, LLC (Respondent)

The Claimant is a widow living in Pennsylvania.  The lawsuit claims that the Claimant maintained most of her funds in cash accounts at Wells Fargo bank and was referred to WELLS FARGO broker, Boris Niko, because he spoke fluent Russian, familiar to the Claimant. The Claimant’s investment experience, according to the lawsuit, was very little with most of her money in cash and tax-free municipal bonds. The Claimant earned a good living and was nearing retirement.  She could not afford to take any risk with her principal.

According to the lawsuit, WELLS FARGO broker, Boris Niko, largely followed his client’s instructions and maintained the accounts in stable tax-free municipal bonds up to about 2020.  The lawsuit alleges that on or about 2020, Niko started buying perpetual preferred bank stock and other perpetual preferred bonds with no maturities. None of the perpetual preferred stock or bonds were insured like the municipal bonds, and the yields were nominally better or not at all than her tax-free bonds on a tax adjusted basis. But they carried greater risk. For example, two of the perpetual preferred stocks were, Silicon Valley Bank and First Republic Bank, both of which collapsed and wiped out the preferred shares value. 

At the end of 2022, the lawsuit states, the Claimant’s principal had fallen by over $1 million dollars. The lawsuit alleges Boris Niko invested into these bank preferred shares or notes on the initial public offerings generating a commission that is believed to be as much as three times higher than if the shares were purchased on the secondary market. The Claimant, the lawsuit alleges, was not sophisticated enough to understand the risk and she was wholly reliant upon h her broker for advice and expected him to follow her instructions. Boris Niko is not named in this lawsuit. Boris Niko voluntarily left Wells Fargo for Ameriprise Financial in 2022.

The lawsuit alleges that the risks of the Preferred stock were never disclosed to the Claimant. Preferred stockholders are subordinate to secured bond holders, unsecured bond holders, and unsecured subordinate bonds. Bondholders have the protection of being able to force a company into bankruptcy, while preferred stockholders do not have that protection. The lawsuit alleges that the Claimant’s account was over concentrated in preferred stocks and bonds and other interest rate sensitive investments and were not suitable investments for her.

Here are some risks to all investors in preferred shares that may have not been disclosed by their financial advisors:

          Risks of Preferred Stocks

1. Interest Rate Risk.

Preferred stocks, like bonds, have an inverse relationship to interest rates. When interest rates fall, the price of preferred stocks rise. Conversely, when interest rates rise, preferred stock prices fall. Investors with long-term maturities or perpetual preferred stocks run substantial risk of holding declining preferred stocks with inferior interest rates when interest rates rise. This is particularly true when you purchase preferred stocks at a time when interest rates are at historical lows. 

• 2. Liquidity Risk.

Liquidity risk amounts to the danger of not being able to sell your Preferred Securities because this type of investment is typically “thinly” traded.  A “thin” market is the result of a low number of buyers and sellers interested in making transactions in the security.  Preferred Securities historically trade in a very thin environment that can be exacerbated by a declining market.  Therefore, an owner of preferred securities not only may face the problem of not being able to find a buyer for the stock, but the stock may also lose more value than other investments under similar market conditions.

• 3. Non-cumulative share risk

Non-cumulative preferred stocks are a type of preferred stock that does not pay the holder any unpaid or omitted dividends. If the corporation chooses to not pay dividends in a given year, the investor does not have the right to claim any of those forgone dividends in the future. A non-cumulative preferred has a very weak claim on the earnings of an issuer.

• 4. Credit Risk

Holders of preferred stocks are exposed to the credit risk of the issuer for the duration of the preferred stock investment. 

WELLS FARGO and their representative’s actions have allegedly caused the Claimant damages of approximately $1,000,000.00. The lawsuit alleges, negligence, breach of fiduciary duty and negligent supervision.

According to FINRA’s BrokerCheck, Boris Niko (BORIS NIKOLAEVSKY), was with WELLS FARGO CLEARING SERVICES, LLC in New Hope Pennsylvania, from 11/27/2013 - 03/10/2022.  He is currently listed with AMERIPRISE FINANCIAL SERVICES, LLC of Feasterville, Pennsylvania, since 3/4/2022. BrokerCheck states that Niko has been in the securities industry for 20 years and was listed with 4 firms.  He is listed both as a broker and as a financial advisor.

If you’ve experienced financial losses due to the actions or recommendations of WELLS FARGO CLEARING SERVICES, LLC and/or their former registered representative, Boris Niko, contact Soreide Law Group and speak to an experienced securities lawyer at no cost regarding the possible recovery of your investment losses through a FINRA arbitration at:  888-760-6552.

Soreide Law Group represents our clients nationwide before FINRA on a contingency fee basis, no fee to you if no recovery.