Secretary of the Commonwealth William Galvin has opened an investigation into Wells Fargo Advisors over inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers.
In a recent regulatory filing, Wells Fargo disclosed that in response to inquiries from federal government agencies it was conducting an internal investigation into its wealth and investment management business.
According to the filing, the company is “assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business.”
As part of the Massachusetts investigation, Galvin’s office will be seeking additional information to determine the scope of Wells Fargo’s internal investigation, as well as reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole.
“I am aware that there has been a recent trend in the industry to push investors into wealth management accounts which may bring more revenues to the firm, but which are not suitable for all investors,” Galvin said. “Given the recent retirement savings crisis in America, referrals and recommendations involving 401(k) accounts should be closely scrutinized, in light of the Department of Labor’s fiduciary rule.”
“Wells Fargo’s recent banking scandal, which involved opening bogus accounts for their customers, leads me to believe that where there is smoke, there’s fire,” Galvin continued. “I need to be assured that Massachusetts residents haven’t been burned by corporate greed.”
Last month, Massachusetts regulators charged broker-dealer Scottrade Inc. with dishonest and unethical activity over fiduciary rule violations stemming from two sales contests which included retirement assets.