Tens of millions of dollars are being paid by Wells Fargo to resolve claims that the banking behemoth overcharged its clients for investment advice.
The U.S. Securities and Exchange Commission (SEC) says in a recent news release that Wells Fargo overcharged more than 10,900 clients and yet managed to collect an additional $26.8 million in advising fees.
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According to the SEC, the overbilling occurred when certain Wells Fargo financial advisors and the businesses the lender acquired agreed to lower the standard advisory fees for some of the banking giant’s clients.
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Even though the contract was written down when the consumers’ accounts were first opened, Wells Fargo neglected to update its billing software.
Director of the SEC’s Enforcement Division, Gurbir S. Grewal, says,
“For years, Wells Fargo and its predecessor firms negotiated reduced advisory fees with thousands of clients, but failed to honor them, overcharging those clients millions of dollars as a result. Today’s enforcement action underscores the need for firms growing their businesses through acquisition to ensure that their growth does not come at the expense of client protection…
Investment advisers must adopt and implement policies and procedures to ensure that they honor their agreements with all of their clients, including legacy clients of predecessor firms.”
Without admitting or disputing the allegations, Wells Fargo has agreed to pay a $35 million civil penalty.
The lender also paid back $40 million, plus interest, to clients who had already paid the extra advising costs.
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