A group of investors has filed a class action lawsuit against Wells Fargo Investments, claiming that investment advisors there steered investors to purchase certain shelf space funds to line their own pockets.
The suit, filed at the U.S. District Court in Northern California last month, alleges that Wells Fargo investment advisors pushed clients to buy certain funds, including scores of Dreyfus products, between June 30, 2000 and June 8, 2005. In exchange, advisors reaped rich rewards and bonuses from a sales incentive plan, which was never disclosed to investors. Advisors are meant to provide unbiased and independent advice to their clients, and to disclose any potential conflicts of interest, according to U.S. securities law.
"Undisclosed sales practices created an insurmountable conflict of interest by providing substantial monetary incentives to sell Shelf-Space Funds to their clients, even though such investments were not in the clients' best interests," reads a release describing the complaint issued by Stull, Stull & Brody, the law firm that launched the class action suit.
Advisors from the San Francisco-based firm culled personal profits from the higher-than-usual fees charged to clients, violating both the Investment Company Act as well as California state law, according to the complaint.
The lawsuit also covers a subclass of investors who own shares of any Wells Fargo Mutual funds, claiming that brokers and investment managers maintained illegal profit-sharing agreements. Owners of Wells Fargo Financial Plans that include Wells Fargo Funds may also be eligible to join the suit.
Stull, Stull and Brody, which has offices in New York City and in Los Angeles, is soliciting investors who may fall into any of these classes to join the suit. Investors who believe they may be eligible, but who would prefer to choose different counsel are free to do so. The deadline for joining the lawsuit is January 10, 2006.
Representatives from neither Wells Fargo nor Dreyfus were available for comment Friday morning. Dreyfus Funds, based in New York, is a subsidiary of Pittsburgh-based Mellon Financial. A complete list of the Dreyfus funds involved in the case, as the fund families included in the Wells Fargo Preferred families are included in a Stull, Stull and Brody release.