In the wake of the fake account creation scandal at Wells Fargo, which the Consumer Financial Protection Bureau called "fraudulent conduct...on a massive scale" as employees engaged in widespread illegal sales practices, such as opening 2 million accounts without customer authorization, knowledge, or consent, FINRA announced a review of its member broker-dealers to ensure cross-selling programs are in compliance with industry rules and regulations.
FINRA's inquiry targets incentives for firm employees who promote bank products, add features to customer accounts, and open additional accounts, which are collectively known as "cross-selling programs."
In an October letter to its member firms, FINRA requested the production of information for the 2011-2016 period that details the firms' cross-selling programs, employee incentives including monetary benefits, a list of employees terminated or disciplined for not meeting cross-selling production goals or for improper cross-selling activities, training materials, review and supervisory procedures, customer complaints, and a list of customers who had accounts opened or modified on their behalf without authorization.
Pursuant to FINRA's rules and guidance, firms are to notify and receive authorization from customers before taking cross-selling actions, such as opening new accounts or adding features to existing accounts, and, as the widespread illegal sales practice activity at Wells Fargo demonstrates, such misconduct can and has gone undetected.
For customers, this series of events speaks to the importance of regular review of investment account-related documents and statements, but even so, firms have previously and likely will continue to be disciplined for fabricating or falsifying such account statements, and for engaging in account-related activity without the customer's knowledge or consent.
If you have invested with a FINRA-member firm whose cross-selling sales practices has cause you harm, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.