5 fraud and discrimination stories you've missed in wealth management

April 27, 2022 3:24 PM

There are two sides to every story, so it’s not surprising that claim and counterclaim are common features in wealth management’s biggest fraud and discrimination scandals of the year.

From industry watchdogs and top-tier banks and brokerages, to individual financial advisors and veteran brokers, here are five of the most significant stories from Financial Planning.

Wells Fargo’s appeal of bombshell ‘fraud’ ruling in FINRA case casts harsh spotlight on regulators

Wells Fargo’s appeal on Feb. 23 against a Georgia court ruling that it had manipulated the dispute resolution system in favor of brokers over customers has “opened a Pandora’s box of negative consequences” for the bank and its overseers, FINRA and the SEC.

This uncompromising assessment from Scott Silver, securities lawyer and co-chair of the American Association for Justice, does not make for pleasant reading in a case in which FINRA, which regulates the brokerage industry, and the SEC, which oversees FINRA, have both come under fire with Wells Fargo.

With a remit to protect investors and the integrity of the market, the two Wall Street watchdogs are now facing pointed questions from Sen. Elizabeth Warren and Rep. Katie Porter on the Georgia case and FINRA’s arbitration process.

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Wells Fargo’s appeal of bombshell ‘fraud’ ruling in FINRA case casts harsh spotlight on regulators

Ex-UBS broker spent a family’s millions on his lovers: SEC

In 62 unauthorized transfers over almost six years, UBS advisor German Nino misappropriated $5.8 million from a client account for “gifts and travel and living expenses for women with whom he had romantic relationships,” according to an SEC complaint.

But the salacious endpoint of Nino’s alleged fraud should not overshadow the reality of systemic failings that allowed him to start his grand scheme in the first place.

“It’s troubling because with all of the compliance we have in the U.S. and all of the regulatory framework, how does this stuff go undetected?” said Bill Singer, a securities attorney and blogger on Wall Street compliance, of a case that fits a pattern of similar cases with advisors also escaping detection for years.

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Ex-UBS broker spent a family’s millions on his lovers: SEC

Raymond James wins in arbitration against ex-brokers seeking $36M

In a case of claim and counterclaim that likely raised the anxieties and eyebrows of potential investors, Raymond James won a commanding arbitration victory against three former brokers requesting $36 million in deferred compensation, damages, fees and other costs.

Lynn Faust, Michael Faust and Joe King filed their suit in July 2019 due to the firm’s “fraudulent ‘internal investigation’ activities” that resulted in their “unwarranted and pretextual termination” for UIT sales. Raymond James countered by accusing the advisors of unjust enrichment and denied the allegations.

But while Raymond James dismissed the advisors in 2018 “due to concerns relating to the nature of advisor’s UIT activity,” a year later the firm itself was the subject of an SEC case alleging excess commission charges in certain UIT sales and other violations, and was obliged to settle for $15 million.

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Raymond James wins in arbitration against ex-brokers seeking $36M

13 big crime, court and deception stories involving financial advisors in 2021

In Hollywood, it’s often said that a story is only as good as its villain. In the reality of Wall Street, the majority of stories are fortunately populated with wealth management advisors who are perhaps less entertaining, but produce great results for their clients.

But certainly where would we be without a few cautionary industry tales of crime and punishment to enlighten us?

Here are 13 of the biggest that made the headlines in 2021.

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13 big crime, court and deception stories involving financial advisors in 2021