Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as the result of an unsuitable recommendation of floating-rate bank loan funds. Earlier this month, the Financial Industry Regulatory Authority announced that it ordered Banc of America and Wells Fargo to pay a fine and restitution for the improper and unsuitable recommendation and sale of floating-rate bank loan funds.
Wells Fargo Advisors LLC was ordered to pay a $1.25 million fine and restitution of approximately $2 million for losses sustained by 239 customers. As Banc of America’s successor, Merrill Lynch, Pierce, Fenner & Smith was ordered to pay a $900,000 fine and restitution of approximately $1.1 million for losses sustained by 214 customers.
Floating-rate bank loan funds can be illiquid and carry significant risks because they invest in loans to entities with below-investment-grade ratings. According to FINRA’s findings, Banc of America and Wells Fargo made recommendations of concentrated purchases of these investments to customers for whom the recommendation was unsuitable. Stock fraud lawyers say that most investors with conservative risk tolerances or who want to conserve principal should not have received a recommendation to invest in a floating-rate bank loan fund.