Wells Fargo Resolves SEC Dispute Over Advisory Fees
From the desk of Jim Eccleston at Eccleston Law
The Securities and Exchange Commission (SEC) announced charges against Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC (collectively, “Wells Fargo”). The charges are related to overcharging advisory fees to over 10,900 investment advisory accounts, resulting in a total excess of $26.8 million. To resolve the SEC's charges, Wells Fargo has agreed to pay a civil penalty of $35 million.
The SEC's order states that specific financial advisers from Wells Fargo and its predecessor firms agreed to lower standard advisory fees for particular clients. When opening their accounts, they manually changed the clients' investment advisory agreements to reflect these reduced fees. However, in some instances, the account processing employees at Wells Fargo and its predecessor firms neglected to input the agreed-upon lower advisory fee rates into the billing systems while setting up the clients' accounts.
Furthermore, Wells Fargo failed to establish and implement written compliance policies and procedures that could reasonably ensure the accuracy of data in the adopted billing systems and prevent the overbilling of clients acquired from predecessor firms and some new clients. Consequently, Wells Fargo and its predecessor firms inaccurately billed certain clients who opened accounts before 2014 for advisory fees until the end of December 2022.
Wells Fargo compensated the impacted account holders around $40 million, encompassing interest, as reimbursement for the excessive charges. Alongside a $35 million penalty, Wells Fargo, without admitting or denying the SEC charges, consented to the Commission's order, which acknowledged the firm's violation of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. The firm also agreed to a cease-and-desist order and censure.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law
