Wells Fargo Advisors has agreed to pay a $500,000 Finra fine and give back $242,000 to 66 customers who lost money in structured products.
Finra signed off on the settlement Monday.
The case involves alleged unsuitable sales of products called “structured repackaged asset-backed trust securities” (STRATS), which paid a variable interest rate from 3 to 8 percent, according to the settlement document.
Finra alleged that Wells Fargo Advisors’ sales materials did not disclose the fact that investors could lose money because of termination fees if the underlying securities were redeemed by the issuer, JP Morgan.
“Wells Fargo Advisors … failed to educate its registered representatives regarding these risks and its sales force therefore could not inform retail customers who purchased the STRATS that they could suffer significant losses,” Finra said in the settlement.
Customers of the firm bought $12 million worth of the products in both primary and secondary markets.
Wells Fargo Advisors spokesman Tony Mattera declined to comment.
Complex structured products have long been on Finra’s radar.
In 2005, the regulator issued a notice to firms about meeting sales practice obligations for the securities. Finra issued a similar warning in 2012 about complex products in general, and since 2008 it has mentioned structured products in its annual letter covering exam and regulatory priorities for the year.