Wells Fargo Faces $3.37 Million FINRA Award Over Alleged Elder Exploitation
From the desk of Jim Eccleston at Eccleston Law
A FINRA arbitration panel has ordered Wells Fargo Clearing Services and its advisor, Stephen L. Smith, to pay approximately $3.37 million in damages to the estate of Genell Mathis.
Mathis, a lifelong resident of Columbus, Georgia, accumulated significant wealth through early investments in Aflac, having purchased shares directly from the company’s founder in the 1970s. Mathis passed away in 2020, leaving behind a complex financial dispute over the unauthorized transfer of her Aflac shares.
According to Bloomberg, the dispute began when Mathis, allegedly influenced by her two nieces, transferred more than 70,000 Aflac shares to them and other relatives under the mistaken belief that it would reduce her estate taxes. However, she later discovered that the transfers provided no tax benefits and attempted- unsuccessfully- to reclaim the shares.
Attorneys for the estate argued that Wells Fargo and Smith failed to properly scrutinize the transactions, despite numerous red flags indicating potential elder exploitation. These warning signs included sudden large transactions and the involvement of family members in Mathis's financial affairs—both of which Wells Fargo’s internal policies cite as indicators of elder fraud.
In a separate state court lawsuit, Mathis's estate recovered approximately 26,000 shares in February 2023. However, around 28,800 shares remained with the nieces. Additionally, the estate claimed $68,000 in capital gains taxes resulting from unauthorized sales of mutual funds and $350,000 in forfeited dividends. In total, the estate sought $4.1 million in damages, which included the value of the unrecovered shares and other financial losses.
The FINRA arbitration panel awarded nearly $3.3 million in compensatory damages, along with $17,500 for expert fees and $625 for filing costs. The panel also denied Smith’s request to expunge the complaint from FINRA’s BrokerCheck database, ensuring that the case remains a permanent mark on his record. Smith, who began his career at Wells Fargo in 2011, has no other disclosures on his record.
Investor advocates and regulators continue to emphasize the growing risks of elder financial exploitation, which costs older Americans an estimated $28.3 billion annually, according to AARP. Cases like Mathis’s underscore the importance of vigilance by financial institutions.
Although FINRA rules allow clients to designate trusted contacts to help prevent fraud, Wells Fargo failed to consistently apply these safeguards in Mathis’s accounts.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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