U.S. FINRA W. Fargo $3.4mn ETPs

On 16 October, FINRA ordered Wells Fargo to pay $3.4mn for ETP sales.

  • To Wells Fargo Clearing Services LLC; Wells Fargo Advisors Financial Network LLC.
  • Wells Fargo associates made unsuitable recommendations of volatility-linked ETPs.
  • Related supervisory failures, $3.4mn restitution will be paid to affected customers.


  • Between July 2010 and May 2012, some registered representatives recommended
    clients trade volatility-linked ETPs, without fully understanding their risks, features.
  • Mistakenly believed could be used as long-term hedge on customer equity position.
  • This misunderstood the purpose of these complex products which were not suitable.

Volatility-Linked ETPs

  • Short-term trading products degrade significantly over time, should not be used in
    a long-term buy-and-hold investment strategy, inappropriate for regular investors.
  • On same day, FINRA issued notice on selling volatility-linked product.

Wells Fargo Findings

  • Failed to implement reasonable system to supervise solicited sales of the products.
  • Took remedial action to correct supervisory deficiencies in May 2012, after fine for
    similar violations relating to sales of leveraged and inverse ETPs, client assistance.
  • Hired a consulting firm, to determine the proper restitution for affected customers.


  • FINRA took account cooperation, remedial action, assistance in resolution of matter.