Wells Fargo Slapped For Sluggish Client Communications, Advisor Record Updates

Friday, May 06, 2011 06:50
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Wells Fargo Slapped For Sluggish Client Communications, Advisor Record Updates

Tags: client communications | FINRA | Wells Fargo

The latest FINRA complaint against Wells Fargo is about more than tardy delivery of fund prospectus materials to clients. It's about failing to use modern communications technology effectively.

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WFC has agreed to pay $1 million to settle charges that it took up to five months to mail prospectuses to roughly 900,000 clients back in 2009.

 

Given the requirement that this material go out within three days -- and the fact that many investors are content to view their fund documentation instantaneously online -- there was clearly a problem here.

 

It turns out that Wells Fargo contracted out to a third-party vendor to send out the prospectuses, but then failed to switch vendors once it became clear that the other company wasn't up to the job.

 

With that in mind, it's a little surprising that FINRA was happy to settle this one for only $1 million. Sure, the paper prospectus has largely become irrelevant in the digital world -- and kills an enormous number of trees -- but rules are rules and a fine of $1.11 per infraction is minuscule.

 

Furthermore, WFC also missed the deadlines to update some 190 of its advisors' U4 and U5 forms during the 2008-9 credit crunch. 

 

This is at least as serious as the prospectus problem, which can be blamed on an outside relationship and has (hopefully) been alleviated by electronic delivery.

 

Maybe the firm was disoriented by the market crash and the awkward assimilation of Wachovia. But again, rules are rules, and this seems like an unusually light slap on the wrist. 

 

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