Recruiters have lambasted wirehouse Wells Fargo for yet another high-profile regulatory misstep, calling it "crazy" and "embarrassing," on top of several years of legal woes that have included a fake accounts scandal and a Justice Department investigation. And the legal slip-up could impact advisor attrition in Massachusetts, some recruiters say.

On Tuesday, Wells Fargo was fined $450,000 for “failing to ensure" its agents and supervisors in the state were "appropriately registered."

During a 30-month period examined by Secretary of the Commonwealth William Galvin’s securities division, it was found that more than 1000 Wells Fargo agents and over 500 supervisors of agents had a lapse in their Massachusetts registrations.

“For [Wells Fargo’s] advisors to not be registered while they are generating commissions is crazy," says Frank LaRosa, CEO of Elite Consulting Partners. "Technically, those advisors should not have been allowed to earn those commissions.”

“It’s embarrassing they can’t even do the basics of having their advisors register with the state they are in," continues LaRosa. "Someone really dropped the ball on this one. This is not normal. To have this many advisors not be registered is not normal. That doesn’t happen.”

The registration lapses at Wells occurred despite the state's Securities Division informing the firm more than 150 times that certain supervisors are required by state regulations to register.

In addition to paying the $450,000 fine and censure, Wells Fargo has agreed to register its agents involved in securities business in Massachusetts, and “review and enhance its own policies and procedures related to registering its agents.”

While LaRosa says the lapse “probably" won't impact recruiting at the wirehouse, it could impact the firm's attrition rate in Massachusetts.

"If [Wells Fargo] has to go back to advisors and recoup revenue that was generated while people were not registered, that will upset a lot of advisors," he says. "Advisors must be registered in the state to receive commissions. If they find out they were not, regulators could force them to go back and recoup money generated.”

“Every time that Wells seems to have cleaned up their mess, they find another corner with something rotten,” Danny Sarch, president of recruiting firm Leitner Sarch Consultants, says.

Wells Fargo has long been in the news for its ongoing legal troubles. In March of 2018 it was reported that Wells Fargo was under direct investigation from the Justice Department and the SEC regarding sales practices in the company’s wealth management units.

In its storied retail banking scandal, some 3.5 million accounts were opened by bank employees without the account owners’ knowledge or permission. The accounts were seemingly opened so Wells Fargo employees could meet their sales goals.

In February of 2019 it was reported that Wells Fargo had begun preliminary settlement talks with the Department of Justice and SEC. The settlement talks, however, appear to have just included retail sales practices and not Wells Fargo’s wealth management unit, even though the company has acknowledged that some parts of the business may have overcharged clients.

“Federal government agencies are conducting formal or informal inquiries, investigations, or examinations regarding fee calculations within certain fiduciary and custody accounts in the Company’s investment and fiduciary services business, which is part of the wealth management business within [Wealth and Investment Management],” Wells Fargo said in a February filing. “The Company has determined that there have been instances of incorrect fees being applied to certain assets and accounts, resulting in both overcharges and undercharges to customers.”

Some recruiters are not so down on Wells Fargo.

“This kind of thing happens periodically at various firms,” Mark Elzweig, president of recruiting firm Mark Elzweig Company, says. It’s not a “routine” occurrence, but “it happens," he adds.

Elzweig has previously told FA-IQ he has placed many advisors at the wirehouse.

At the end of June, LPL Financial was on the hook for $1.1 million in Massachusetts for failing to properly register its brokers.

In LPL’s instance, the firm allegedly allowed 651 brokers that were not registered in Massachusetts to work with clients since 2013. And because they were not registered, Massachusetts regulators said the state was prevented from reviewing the agents’ qualifications and records.

When asked about what caused the lapses in registrations, why supervisors were not registered despite Wells receiving notice from the securities division, and what Wells plans to specifically do to prevent this from happening again, Shea Leordeanu, head of corporate communications for Wells Fargo, says “we are pleased to have resolved this matter with the Massachusetts Securities Division.”