2 ex-Wells Fargo brokers booted over unsuitable energy investments
FINRA expelled two former Wells Fargo brokers from the industry this week for allegedly investing too much of their customers' money in energy-sector securities, according to the brokers' settlements with FINRA.
The regulator blasted Charles Frieda and Charles Lynch for recommending an investment strategy that was overly concentrated in four speculative equity securities to more than 50 customers.
"Due to the speculative nature of the recommended securities, the volatility of the energy market, and the high level of concentration, this strategy exposed customers to significant potential losses," FINRA chided the reps.
For some customers, the investments exceeded 50% of their net worth, compounding their risks, FINRA said.
Frieda and Lynch allegedly recommended that certain of their over-concentrated customers stick to the strategy even when the market began a downturn in 2015, a move that caused them to "suffer millions of dollars in aggregate losses," FINRA said.
The regulator faulted them for pursuing the risky strategy without considering each customer's individual investment experiences, risk tolerance, investment time horizon, net worth, liquidity needs and income.
The two brokers, who worked for Wells Fargo Advisors in Irvine, California, pursued the strategy from November 2012 to October 2015.
Neither could be reached for comment. Frieda's attorney, Brian Rubin of law firm Eversheds Sutherland, declined to comment.
In their settlement with FINRA, the two neither admitted nor denied the allegations but consented to an entry of FINRA's findings.
Frieda and Lynch both joined Wells Fargo Advisors from Morgan Stanley in October 2012, according to BrokerCheck records. Lynch was terminated in April 2016, while Frieda was discharged in August 2017, FINRA said.
The two each amassed 50 or more customer complaints related to the losses customers incurred from the energy investments. The complaints were all settled for amounts ranging from $5,000 to $850,000, according to their BrokerCheck reports.
"The advisors involved in this matter are no longer with the firm, and we are cooperating fully with regulators to resolve the issues," Emily Acquisto, a spokeswoman for Wells Fargo, said in an emailed statement.
Frieda and Lynch join at least seven other Wells Fargo advisors and brokers who were barred this year for alleged violations ranging from churning to theft or for refusing to cooperate with FINRA investigations. James Schaedler, for example, was ousted in July for failing to provide FINRA with the documents it needed to assess allegations that he exercised influence over a former elderly client who amended her trust to make him a beneficiary of her $2.3 million estate.