FINRA has ordered Wells Fargo's brokerage arm to return $3.4 million to about 1,300 retail brokerage clients who were solicited to buy volatility-linked exchange-traded products between July 1, 2010 and May 1, 2012.
Broker recommendations to buy the volatility-linked ETPs did not fit retail investors' risk profiles, and therefore failed to meet FINRA's suitability standard for all investment recommendations.
Officials from FINRA, the brokerage industry's self-regulated arm, and Wells Fargo, confirmed the breaches of the suitability standard on the recommendations of volatility ETPs were the result of brokers' ignorance of the complex products, and not necessarily the result of churning, or the practice of recommending unsuitable products to generate commission revenue.
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