Learning a Lesson from Wells Fargo

In early September 2016, Wells Fargo was fined $185 million for opening up more than two million accounts under existing customers’ names, without those customers knowing about it, all in pursuit of the mighty dollar. It led to the firing of 5,300 employees. Wells Fargo’s CEO, John Stumpf, was denied his severance package after stepping down from his role, likely due to Elizabeth’s Warren eviscerating commentary and questions about his responsibility for the bank’s fraudulent practices.

In particular, she asked about the practice of cross-selling – getting a bank customer to open multiple accounts with Wells Fargo – which she said “isn’t about getting customers what they need…. Cross-selling is all about pumping up Wells’ stock price.” She cited three years of quarterly calls to investors by Stumpf, in which he specifically mentions cross-selling successes as a reason to buy more stock in the company.

Cross-selling

Cross-selling is not an illegal practice per se. Most people use the same bank for their checking and savings accounts. They may open up credit cards through the bank or use the bank for their mortgages. The problem here was that Wells Fargo was opening accounts under existing customers’ names without their knowledge or consent. The practice benefitted Stumpf by more than $200 million in his holdings of the company’s stock. This highlights a major problem in the industry. When consumer trust should be the cornerstone of our financial system, profits are too often the force behind financial transactions, including investment recommendations by stock brokers, financial advisors, and their firms.

The effects of fraudulent and negligence stockbrokers

When brokerage firms make decisions based on profits over the needs of their customers, individual investors are at risk of loss due to the temptation for brokers to engage in wrongdoing, such as mishandling client funds or providing fraudulent investment advice. The ripple effects can be astronomical. Broker wrongdoing can cost you your entire retirement savings, the money set aside to grow your business, or your kids’ college funds. It can leave you in such debt that you are forced to declare bankruptcy or have your home foreclosed upon. It can also leave you feeling angry, frightened, anxious and betrayed.

Investment advisors can be pushed into selling bad investments by their supervisors; they can also choose to put their own profit margins first, through churning or selling on margin. They are supposed to recommend suitable investments for their clients’ needs, and their failure to do so may make them money, but it can cost you everything.

Luckily, you have legal rights for pursuing justice when your broker or advisor has engaged in fraudulent actions or has acted negligently when it comes to your money. At The Frankowski Firm, we help uphold those rights in FINRA arbitration. Our securities fraud attorneys can explain your options moving forward and represent your interests.

If you sustained financial losses, either because of a fraudulent or negligent broker, The Frankowski Frim can help. Please call 888.741.7503 or fill out our contact form to learn more about our services.