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Are Brokers Using Wells Fargo-Like Tactics?

October 17, 2016

While former SEC executives aren’t sure if brokerage firms are using the same high-pressure sales tactics that landed Wells Fargo’s retail bank in trouble last month, they mostly agree that regulators should check, according to Financial Advisor magazine.

Wells Fargo was fined $190 million last month following revelations that thousands of its bank employees opened two million fake deposit and credit accounts without customers’ knowledge. The fallout from the scandal has been severe, with Sen. Elizabeth Warren, D-Mass., going as far as calling for a criminal investigation of Wells Fargo Chairman and CEO John Stumpf, after he stepped down last week, as reported previously. The scandal seems to have also crept into the bank’s wealth management business, Wells Fargo Advisors, after former employees and customers told the Charlotte Observer that the brokerage engaged in a similar scam, which prompted one law firm to launch an investigation of the unit, as reported previously.

Speaking at the Securities Enforcement Forum, former SEC Chair Harvey Pitt said he’s positive that not only banks, but also brokerages have engaged in scams similar to the one that took place at Wells Fargo, Financial Advisor magazine writes. His reasoning is that people take their bad habits with them when they move jobs, according to the publication. Former SEC Enforcement Director Stanley Sporkin said he’s never seen it himself, but he thinks regulators should analyze whether it’s happening at other large financial institutions, Financial Advisor magazine writes.


Former SEC Commissioner Dan Gallagher, on the other hand, said it’s unlikely the behavior has spread to broker-dealers, according to the publication. Gallagher thinks people pay closer attention to their brokerage statements than their bank accounts, Financial Advisor magazine writes. And another former SEC official who refused to give his name or title to the publication says what happened at the bank was “a little aberrational.” But even this official said the SEC should take a look at whether such scams are taking place at other securities companies, Financial Advisor magazine writes.

By Alex Padalka
  • To read the FA Magazine article cited in this story, click here.