Things I learned at an arbitration with Wells Fargo Advisors last week.

Posted by on May 15, 2013 in arbitration, securities, Stockbroker issues | Comments(0)

As you might know, I handle a lot of securities arbitrations. I usually end up learning a thing or two during the course of the arbitration. I thought I’d share some things with you.

1 – Wells Fargo Advisors does not have a policy stating that commissions generated by a client only belong to the “broker of record.” This may be the practice, but the branch manager testified that there is no such policy.

2 – Wells Fargo Advisors, as a matter of course, compounds interest monthly when it calculates the amount it is claiming on promissory notes. However, the promissory notes do not provide for monthly compounding of interest. When the witness was asked why the interest was compounded monthly, he essentially said “because that’s how we do it.” Wells Fargo withdrew its monthly compounding of interest calculation and was going to submit the simple interest calculation by affidavit. Haven’t seen the affidavit yet.

3 – Wells Fargo Advisors has a prepaid management fee agreement. A Wells Fargo witness claims that it is electronically attested to. No such agreement was produced.

4 – Wells Fargo Advisors’ practice of conducting most supervision through a central office, rather than at the branch level, has actually reduced the level of supervision, in my opinion as someone with over 25 years’ of experience in the securities business, not increased it. For example, a central supervision office employee has no “feel” for the office. That employee won’t recognize patterns or put a broker’s rep number to a name and then wonder why the broker is engaging in certain transactions. Instead, it appears that the branch manager pretty much waits for the central office to tell him/her what to do. In the meantime, there are certain things that the central office doesn’t look for and the branch manager can’t see. It’s a shame, too.

I used to describe being a branch manager as requiring as much art as science. Walking around the office, the branch manager can “feel” what’s going on. The manager can tell who is working and who isn’t. But if the manager is simply waiting for a computer to tell him or her what to look for, rather than being proactive, then it may be too late. And then to remove many of these tasks and assign them to some remote office to look at, well that’s just asking for a problem.

As an example, many years ago, probably close to 30, a regional administrative manager walked into a satellite office at 2:30 or so in the afternoon. The lobby was full of clients waiting to see one of the two brokers in the office. The office looked very busy. But the office had only entered 3 or 4 order tickets by 2:30. The regional admin thought it was odd and they decided to close the office and move the the brokers to the main office, under greater supervision. The brokers refused to relocate and resigned. After they left the firm, the wheels came off of the Ponzi scheme they were participating in. The regional admin was right. A computer could not detect what the regional admin understood. By the way, that regional admin is now a branch manager with Wells Fargo. And I hope his talents aren’t being wasted by relying only on computer printouts.

Today I enter my 21st year as a resident of the Sunshine State. When I left New York, branch managers managed. They reviewed. They gave sales advice. They mentored. Now they wait for HAL (that’s a Space Odyssey reference there) to tell them what to do. In my opinion, heavily relying on computers for branch office supervision (and I love computers for many things) is a mistake. Computers don’t feel. They don’t see. They don’t hear. But that’s what good managers do. Or at least they did until someone decided that computerized supervision was the next big thing.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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