Wells Fargo Advisors Ordered to Pay Investor $1.8 Million for Losses - Finra Panel

  By Matthias Rieker 
 

An arbitration panel ordered Wells Fargo & Co.'s (WFC) retail brokerage unit to pay a retired real-estate broker $1.8 million for losses tied to investments in soda and pharmaceutical companies.

Philip Lovell accused Wells Fargo Advisors and Wells Fargo broker John Bulkley Meacham of having him invest his money in thinly traded securities that left his portfolio with little diversification and unsuitable for his retirement, said Mr. Lovell's lawyer, Marc Seldin Rosen.

Mr. Lovell's claims against Well Fargo include violation of the firm's fiduciary duty and negligence, according to the ruling from the Financial Industry Regulatory Authority arbitration panel.

He had demanded compensation for $9 million in losses. "In the world of Finra, this is a significant recovery," Mr. Rosen said.

As is customary, the panel didn't provide details on the reasoning for its decision, which was dated July 30. Mr. Meacham and Wells Fargo denied the claims, according to the ruling.

Mr. Lovell's portfolio did well initially, Mr. Rosen said. But the commercial-real-estate broker retired in 2004, and by then the investments were too concentrated in "startup pharmaceuticals with no earnings history," Mr. Rose said.

Mr. Rosen said Mr. Lovell wanted to sell shares in 2006 and 2007 because he was concerned about their value, but Mr. Meacham talked him out of it. "The broker was trusted completely," Mr. Rosen said.

The shares named in the arbitration case were Jones Soda Co. (JSDA), Nektar Therapeutics (NKTR), Poniard Pharmaceuticals Inc. (PARD), and Helicos BioSciences Corp. (HLCSQ). All four took a sizable hit during the financial crisis: shares of Jones Soda and Helicos, for example, fell from $28 and $13, respectively, to below $1.

Mr. Rosen said there were ample red flags for Mr. Meacham's supervisor, but nobody stepped in. "There need to be greater checks and balances," he said. "The entire relationship was a disaster."

Wells Fargo didn't have an immediate comment. A lawyer for Mr. Meacham didn't immediately return a phone call to seek comment.

Mr. Meacham had also borrowed $50,000 from Mr. Lovell, interest free and without Wells Fargo's approval. Wells Fargo prohibits such loans from customers to their brokers, and Mr. Meacham was suspended for three months, according to documents on Finra's websites.

Wells Fargo discharged Mr. Meacham in 2010 for violations related to the handling of records, according to Finra. He was permitted to resign from Chapin Davis Investments in 2012.

Mr. Meacham filed for bankruptcy in 2013, according to the arbitration ruling. "Therefore, the panel made no determination with respect to the claims against Meacham," the ruling said.

Write to Matthias Rieker at [e-mail]

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