Massachusetts Probes Rollover Recommendations

Once again invoking the Labor Department’s fiduciary rule, Massachusetts’ Secretary of the Commonwealth William F. Galvin has opened another investigation into broker-dealer activities.

The latest investigation involves Wells Fargo Advisors, and seeks information “related to inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers,” according to a press release.

The announcement references a disclosure by Wells Fargo in a recent regulatory filing that the firm was “assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the Company’s investment and fiduciary services business.”

Galvin’s office says that as part of the investigation it will be seeking additional information to determine the scope of Wells Fargo’s internal investigation, as well as reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole.

“I am aware that there has been a recent trend in the industry to push investors into wealth management accounts which may bring more revenues to the firm, but which are not suitable for all investors,” Galvin said. “Given the recent retirement savings crisis in America, referrals and recommendations involving 401(k) accounts should be closely scrutinized, in light of the Department of Labor’s Fiduciary Rule.”

Less than a month ago, the Massachusetts Securities Division filed charges against Scottrade for knowingly violating its internal policies regarding implementation of the DOL fiduciary rule.

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