WELLS FARGO AND BANK OF AMERICA FINED BY FINRA FOR UNSUITABLE SALES OF FLOATING-RATE BANK LOAN FUNDS

The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo and Bank of America $2.15 million and ordered the firms to pay more than $3 million in restitution to customers for losses incurred from unsuitable sales of floating-rate bank loan funds. FINRA ordered Wells Fargo Advisors, LLC, as successor for Wells Fargo Investments, LLC, to pay $1.25 million and reimburse approximately $2 million in losses to 239 customers. FINRA ordered Merrill Lynch, as successor for Bank of America Investment Services, Inc., to pay $900,000 and reimburse approximately $1.1 million in losses to 214 customers. Wells Fargo and Bank of America neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

Floating-rate bank loan funds are mutual funds that invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment-grade, which subjects the funds to significant default risks and illiquidity.

FINRA found that Wells Fargo and Bank of America brokers recommended floating-rate bank loan funds to customers whose risk tolerance, investment objectives, and financial conditions were inconsistent with the risks and features associated with floating-rate loan funds. The subject customers were seeking to preserve their principal or had conservative risk tolerances, but the brokers made recommendations to purchase floating-rate loan funds without having reasonable grounds to believe that the purchases were suitable for the customers. FINRA also found that the firms failed to train their sales forces regarding the unique risks and characteristics of the funds. The firms also failed to reasonably supervise the sales of floating-rate bank loan funds.

Have you suffered losses in floating-rate bank loan funds sold by Wells Fargo Advisors, Merrill Lynch, or any other broker-dealer? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers who recommended unsuitable investments and unsuitable investment strategies that caused investors losses.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

THE HIGHLAND FLOATING RATE ADVANTAGE FUND FRAUD

If a stock brokerage firm or any of its advisors represented the Highland Floating Rate Advantage Fund (the "Highland Fund") to be a "safe" investment or an investment where you could obtain a "high level of current income, consistent with preservation of capital," then you were defrauded. The Highland Fund was anything but a safe conservative income producing investment. It was a highly speculative investment that utilized leverage to invest in "junk" bank loans. The combination of leverage with less than investment grade bank loans was a recipe for disaster. There have been too many investors complaining about how they were lulled into making unsuitable investments in the Highland Fund.
All bank loan funds are risky. But the problem with the Highland Fund was its marketing materials and the fact that its managers utilized more leverage and invested in more bank loans carrying greater risk than other bank loan funds. The Highland Fund used 25% more leverage than other bank loan funds. Generally, bank loan funds invest in loans that are rated BB or B by Standard & Poors, which is just below investment-grade. The Highland fund had twice as much of its holdings in the lower B rated loans and nearly seven times as much of its assets in the highly speculative CCC rated loans. There was no reasonable basis for characterizing the Highland fund as having an investment objective "consistent with preservation of capital" other than to mislead investors.
The Financial Industry Regulatory Authority (FINRA) has issued an Investor Alert to caution investors about the high returns promised by floating rate bank funds. FINRA is concerned and so should you be concerned about stockbrokers who downplayed the risks and emphasized the higher returns of these bank loan fund investments.
Have you suffered losses resulting from an investment in any of the Highland Funds? Those symbols are HFRCX, HFRBX, HFRAX, and HFRZX. If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against stockbrokers who fraudulently offered and sold the Highland Fund to investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.