Wells Fargo will pay a $35 million fine to settle accusations that it improperly recommended risky investments to some of its clients, including senior citizens and retirees, the Securities and Exchange Commission said yesterday, according to the Washington Post. These clients were encouraged to buy a risky version of an exchange-traded fund, known as an ETF, according to the SEC’s cease-and-desist order. These “single-inverse ETFs” use complex financial engineering to deliver big profits when stocks fall. But these types of ETFs can lead to devastating losses when held for more than a day and are traditionally recommended only for sophisticated investors. Wells Fargo recommended that some clients hold them for “months or years,” even though those clients had “moderate or conservative risk tolerances,” according to the SEC settlement. “Some of these clients had little or no relevant investing experience.”
