A Financial Industry Regulatory Authority arbitration panel has ordered Wells Fargo and one of its former financial advisors to pay a pair of investors a fraction of the damages they claimed in connection with allegations of churning and unsuitable investments.
Edward and Wendy Pesicka filed a claim in 2017 against Wells Fargo, its financial advisor John Rauch and its former advisor Gregory Pease, accusing them of breach of fiduciary duty, fraud, negligence, unjust enrichment and conspiracy, among other violations, according to an award document published by the industry’s self-regulator.
The Pesickas accused Pease, in his capacity as a discretionary account benefit investor while he was working for Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network, of altering the risk profiles on their account application forms, “routinely” churning their various investments and placing them in products exceeding their stated risk tolerance, with “many” of the investments “made with the sole purpose of generating additional commission or fees in Pease’s favor.”
The claim sought damages between around $6.5 million and $9.45 million, treble damages and lawyers’ fees and costs of around $1.2 million, according to the award document.
Wells Fargo, Rauch and Pease sought the dismissal of the claim with prejudice as well as expungement of all references to the matter from the records of Rauch and Pease, but the company didn’t pursue the expungement request, Finra says.
Last week, the arbitrators ordered Wells Fargo and Pease to pay the Pesickas approximately $732,000 in compensatory damages plus interest and denied all other claims, without explaining their reasoning, according to the award document.
Rauch began his financial services industry in 1987 and was registered with several firms, including UBS and Morgan Stanley, before joining Wells Fargo in 2012, where he remains registered, according to BrokerCheck.
Pease joined the industry in 1994 and was registered at Merrill Lynch and Morgan Stanley before coming to Wells Fargo in 2012, according to BrokerCheck. He left the firm in January 2017 and became registered as a broker with International Assets Advisory, where he stayed until the end of that year, according to his BrokerCheck record.
In February 2017, Pease also registered as an investment advisor with Hayden Royal, switching his registration to Nobleridge Wealth in July 2018, according to the Securities and Exchange Commission’s Investment Adviser Public Disclosure database. He left Nobleridge in May last year and never registered with another firm, according to BrokerCheck and the IAPD.
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