The Securities and Exchange Commission Friday charged Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC for overcharging more than 10,900 investment advisory accounts for roughly $26.8 million in advisory fees.
To settle the SEC's charges, Wells Fargo agreed to pay a $35 million civil penalty to settle the matter, which involved clients who opened accounts prior to 2014 and advisory fees charged to them through late 2022.
Wells Fargo Clearing Services, LLC, formerly known as Wells Fargo Advisors, LLC, is a Delaware limited liability company headquartered in St. Louis, Missouri.
According to the SEC's order, certain financial advisors from Wells Fargo and its predecessor firms — which include AG Edwards and Wachovia — "agreed to reduce the firms' standard, pre-set advisory fees for certain clients and made handwritten or typed changes on the clients' investment advisory agreements that reflected the reduced fees at the time their accounts were opened."
However, in certain instances, "the account processing employees at Wells Fargo and its predecessor firms failed to enter the agreed-upon reduced advisory fee rates into the firms' billing systems when setting up the clients' accounts."
As the order explains, AG Edwards and Wachovia Corp. announced a merger in May 2007 that closed on Oct. 1, 2007, at which time AG Edwards became a wholly owned subsidiary of Wachovia. The combined asset management and brokerage firm became known as Wachovia Securities with about $1.1 trillion of assets under management.
In October 2008, Wells Fargo and Wachovia announced a merger, which closed on Dec. 31, 2008. On May 1, 2009, Wachovia changed its name to Wells Fargo, and by early 2011, Wachovia was fully integrated into Wells Fargo.
The combined entity had $1.3 trillion in assets under management. Through the integration, Wells Fargo acquired about 891,000 advisory accounts from Wachovia, which included the legacy accounts from AG Edwards.
