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DOL Fiduciary News: March 9, 2018

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Massachusetts Launches Investigation into Wells Fargo Advisors Sales Practices

Financial Advisor; March 8, 2018

Massachusetts Secretary of the Commonwealth William F. Galvin announced Thursday that his office has opened an investigation into Wells Fargo Advisors.

The investigation, Galvin’s second to reference the Department of Labor’s fiduciary rule, is seeking information from the firm related to its “inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers,” the securities regulator said in a statement.

“I am aware that there has been a recent trend in the industry to push investors into wealth management accounts which may bring more revenues to the firm, but which are not suitable for all investors,” Galvin said. “Given the recent retirement savings crisis in America, referrals and recommendations involving 401(k) accounts should be closely scrutinized, in light of the Department of Labor’s Fiduciary Rule.”

Galvin made national headlines in February when he charged discount broker-dealer Scottrade with aggressive and improper sales practices in retail and retirement accounts in violation of the DOL’s rule—the first such case in the country.

Wells Fargo itself disclosed in a recent regulatory filing that it is “assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business,” the Massachusetts securities division said in a release. 

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