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

• 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.

Allegations

• 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.

Settlement

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