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Compliance Overkill at Wells Fargo?

A number of Wells Fargo bank brokers who have resigned or been terminated contend that the bank is taking compliance overboard--in some cases, for its own purposes.

A number of Wells Fargo bank brokers who have resigned or been terminated contend that the bank is taking compliance overboard--in some cases, for its own purposes.

A former Wells Fargo rep in the San Francisco Bay area, who asked not to be identified, says that last December she returned from an errand one afternoon to learn her regional manager had been snooping through her trash can and briefcase, apparently hunting for compliance violations. According to the former rep, a few weeks later, after an investigation by the compliance department, she was fired for what the manager found: A customer's copy of a needs assessment thrown in the trash.

"I had done a $2,500 IRA rollover for a customer in their 20s with no other assets," the rep says. "The customer didn't want [the copy]. It was trivial. It was stupid [but] they consider that every customer should have it. They were really nit-picking."

This former Wells Fargo rep also claims the offense was written up on her U-5 as failure to follow company policy. She believes her regional manager was looking for an excuse to get rid of her after she returned from an extended maternity leave.

"This was such a shock," she says. "They wanted to get rid of me one way or another."

Though the NASDR decided no investigation was warranted over the U-5 disclosure, this rep says the mark looks bad on her record: She says her license was held up for one and a half months as she transferred to a new bank brokerage program. And at least one bank, Citibank, refused to hire her. She is considering whether to file for arbitration.

Several other former Wells Fargo reps have encountered what they view as similar heavy-handedness over minor infractions, but specifically asked not to be included in this story.

Wells Fargo says, "From time to time, financial consultants violate [company and regulatory] policies. When they do, they are subject to disciplinary action up to and including termination, although we rarely do terminate. ... In the last year, we have terminated fewer than a dozen FCs for such violations." The bank adds that fired brokers' U-5s show "the reason for their departure in accordance with NASD rules."

But Dan Burkhart, recruiter for Search West in Newbury Park, Calif., who has seen at least a half-dozen Wells Fargo reps with similar situations in the last year, says, "I'm seeing brokers being pushed out of the industry for minor infractions that normally wouldn't be punishable at all." In many cases, the brokers' employment records are marked with failure to follow company procedures.

In other cases, reps say the bank's desire to settle with clients who are also depositors works against reps. Frequently, when a customer makes a securities transaction that goes against them, the bank will reimburse them to avoid a dispute. These trade reversals often appear on the reps' records as unauthorized trades, according to one former Wells rep.

In one such case, the bank returned a customer's $15,000 after a trade went against her, says Jonathan Schwartz, an attorney in Marina del Ray, Calif., who has been approached by several terminated Wells Fargo brokers. "The branch manager told the rep she was a very good customer of the bank and that if they didn't reverse this trade, she'd take her $2 million to another bank. They fired him and put a $15,000 cloud on his U-5."

Operating under a different regulatory framework, banks often take a more harsh compliance approach than traditional brokerages. "In traditional brokerage, wirehouses realize that some publicity and customer litigation that gets media attention is part of business. ... In bank brokerage, [reputation risk] is factored into regulatory exams," by the Office of the Comptroller of the Currency, says Tim Wasson, compliance officer at First of America in Kalamazoo, Mich. "The threat of litigation is an anathema, the kiss of death. It's poison."

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