There are options for customers of former Wells Fargo financial advisors Charles Frieda (CRD# 5502319) and Charles Lynch (CRD# 3004877) who are accused of over-concentration of securities in the speculative and high risk energy-sector in their customer accounts. Frieda and Lynch were partners in business at Wells Fargo.
In December 2017, Frieda and Lynch consented to the FINRA sanction and to the entry of findings that they recommended “an investment strategy that was unsuitable for certain retail customers by recommending an over-concentration in energy-sector securities, some of which were speculative, resulting in significant customer losses. The findings stated that due to the speculative nature of the recommended securities, the volatility of the energy market, and the high level of concentration, this strategy exposed customers to significant potential losses.” FINRA found that Frieda and Lynch failed to properly consider and failed to obtain accurate customer investment profile information to determine the suitability of his over-concentration strategy and the securities they recommended as part of that strategy. By following Frieda and Lynch’s recommendations, the customers suffered millions of dollars in aggregate losses.
In November 2017, FINRA barred Frieda and Lynch for an investment strategy concentrated in the energy sector. According to FINRA November 2012 and October 2015, Frieda and Lynch Frieda and Lynch together recommended an investment strategy that involved four speculative energy stocks to the majority of their customers (more than 50), which resulted in significant losses between.
This strategy exposed their clients to significant potential losses, given the nature of the securities, volatility of the energy sector, and high level of concentration in customer accounts. Additionally, FINRA alleged that Frieda and Lynch failed to consider the suitability of their clients for these investments, and did not take into consideration each customer’s individual investment experience, risk tolerance, investment time horizon, net worth, liquidity needs, and income. Frieda and Lynch also did not properly assess the significant potential risks associated with his recommended strategy for each of these customers, which was compounded by concentration exceeding 50% in the energy sector.
Over the past few years, oil prices have significantly declined. A supply glut in 2014 and 2015 led to some of the lowest prices the market has seen in recent years. In turn, securities values also dropped. The volatile energy sector experienced significant turmoil, and many energy companies were negatively impacted when global crude oil prices fell below $40 per barrel at the end of 2015. This was the lowest level since early 2009, as supply was in excess of global demand. Oil and gas companies experienced a spike in bankruptcies, which have left many investors reeling.
It is alleged that Frieda and Lynch recommended oil-and-gas exploration companies, including Magnum Hunter Resources and Halcon Resources Corp. Magnum Hunter Resources was delisted from the New York Stock Exchange in November 2015 after falling to 15 cents after a high of $9 two years earlier, and it later declared bankruptcy in December 2015. Halcon Resources Corp. dropped to 98 centers in April 2016 after a high of $35 in June 2014.
Mr. Frieda was terminated by Wells Fargo this past August. Mr. Lynch was terminated in April 2016. Neither is currently employed in the securities business.
Frieda was registered with Wells Fargo Clearing Services, LLC in Irvine, California from October 2012 until September 2017. Frieda has been the subject of 55 customer complaints between 2012 and 2018, one of which was withdrawn, according to his CRD report. Fifty-one of the customer complaints have been settled, most having to do with unsuitable and over-concentrated investments in the high risk energy sector, with settlements including $850,000, $750,000, $575,000 and down to $11,000. Three pending complaints are regarding:
- April 2018. “Client alleges “an unusable amount of energy stocks” that was not in line with his investment objectives and further that he was not informed of the risks of such stocks or of investing in one market sector. (11/24/2014-8/22/2017).” The case is currently pending.
- March 2018. “Claimants allege that from 2012 through 2018, FA purchased unsuitable securities.” The case is currently pending.
- August 2017. “Clients allege inappropriate investments for a conservative, low-risk portfolio. (5/20/2013-8/22/2017).” The case is currently pending.
Lynch was registered with Wells Fargo Advisors, LLC in Irvine, California from October 2012 until May 2016, after he was terminated for “loss of management confidence.” Lynch has been the subject of 57 customer complaints between 2012 and 2018, one of which was withdrawn, according to his CRD report. Most of the settled customer complaints were regarding over-concentrated and unsuitable investments in the high-risk energy sector. Two pending customer complaints are regarding:
- March 2018. “Claimants allege that from 2012 through 2018, FA purchased unsuitable securities.” The case is currently pending.
- August 2016. “Arbitration: Claimant alleges that starting on or about 2013, the FA made unsuitable investments. Complaint: Clients claimed they lost almost half of their investments due to the over-allocation and concentration in highly risky oil and energy companies, penny stocks and other unsuitable investments. (10/11/2012-2/12/2016).” The case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Wells Fargo Cleaning Service, LLC may be liable for investment or other losses suffered by Frieda and Lynch’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
"*" indicates required fields
