FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq., Relating to Matters Involving Fraud, Selling Away, Outside Business Activity Misrepresentation and Negligent Supervision.
Wells Fargo Advisors, LLC fka Wachovia Securities, Inc. (CRD #19616, St. Louis, Missouri) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $350,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to establish, maintain and enforce adequate WSPs for its Escheatment Group (Escheatment) addressing the restoration of abandoned accounts. The findings stated that the firm considered an account to be abandoned upon receipt by the firm of three returned account statements by the postal service. The firm’s written procedures required that employees wishing to restore customer accounts from an abandoned status send a written request to Escheatment to restore the account. Upon receipt of the written request, and based solely upon the representations included in the request, Escheatment restored the account to an active status and notified only the requestor that the account had been restored to an active status. The findings also stated that the firm’s written procedures failed to identify the firm personnel who were authorized to submit requests to have abandoned accounts restored or released from abandoned status. Escheatment accepted requests to restore abandoned accounts from branch office personnel working in the branch office where the abandoned account was last serviced. The findings also included that the firm’s written procedures did not require that the requestor obtain supervisory approval before submitting requests to have abandoned accounts restored or released from abandoned status, did not require the requestor to submit proof that a customer had been located and did not require the requestor to submit proof of the customer’s new address. The firm’s procedures also did not require that Escheatment notify branch office managers when accounts were restored to active status.
FINRA found that after the restoration of an abandoned account, the requestor was required to submit a change of address request with the customer’s new address to the firm’s New Accounts Group. Upon receipt of the address change requests, the firm changed the address of record of the restored account and sent letters confirming the change of address to both the customer’s new and old address, although the old address was invariably an invalid address. FINRA also found that the firm’s deficient procedures facilitated a firm operations manager’s conversion of approximately $850,000 in customers’ funds from retail accounts for her personal use and enabled the operations manager’s conduct to escape detection by the firm. (FINRA Case #2009020630701).