FINRA fined and suspended former Wells Fargo Advisors Financial Networks broker Richard Stephen Hughes for instructing an elderly client to lie about the commissions charged in short-term trading unit investment trust (UIT) and Class-A share mutual fund transactions. In addition to deeming Hughes' underlying UIT and mutual fund recommendations unsuitable, the report states that as a Wells Fargo investigation loomed, Hughes provided his 73-year-old client with a written script of how he wanted her to respond to certain questions that the firm might ask, falsely stating to his client that the purpose of the firm's questioning had to do with the client's age.
FINRA determined these written responses, provided by Hughes, were false.
After leaving Wells Fargo in 2016, Hughes joined Summit Brokerage Services in Illinois, serving at Summit from 2016 through 2018.
The investigation begins in 2015, when Hughes (CRD #1537720) allegedly recommended his then-72-year-old customer invest $545,000 in bond UITs, only to sell them three months later for $506,000, $39,000 less than the $545,000 initially invested.
The report states that Hughes then recommended his elderly client invest the proceeds in mutual funds, recommending three Class A-share mutual funds, which his client purchased for approximately $498,000, plus up-front sales charges, only to sell those Class A-share mutual funds less than a year later, for $420,290, nearly $78,000 less than the original purchase price.
Not yet done, Hughes recommended his then-73-year-old client use the proceeds to purchase $377,299 in bond UITs—thus incurring additional commissions, mark-up costs, and fees.
FINRA calculated that the elderly investor's account incurred more than $34,000 in excessive and commissions and fees as a result of Hughes' unsuitable short-term UIT and Class A-share mutual fund trading.
Less than a year later, Hughes liquidated his customer's mutual funds, triggering an alert in Wells Fargo's supervisory system and causing the firm to initiate an internal investigation.
In addition to providing false answers to his supervisor regarding the mutual fund and UIT recommendations, Hughes purportedly met with his client to provide her with a written script of how he wanted her to answer questions from the supervisor, falsely informing his elderly customer that the purpose of the supervisor's questioning was a welfare check due to her age.
FINRA determined the script contained largely false information, such as claiming that the customer was aware of the commissions charged when she was not.
Fortunately, Hughes' client did not read from the script and, when contacted by Wells Fargo supervisory staff, informed the firm that she was not aware of the commissions in the account, that Hughes had provided her with a statement to read to the firm if she was contacted, and that this prepared statement was false.
If you have invested with former Wells Fargo and Summit Brokerage Services representative Richard Stephen Hughes or with any broker or financial adviser whose unsuitable recommendations to excessively trade a long-term investment horizon product on a short-term basis has proven harmful to your investments or interests due to the commissions, fees, and sales charges incurred as a result—not to mention the more straightforward trading losses by investing in a fledgling UIT or mutual fund—please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.