In February 2018, a former client of Wells Fargo Clearing Services won an award in a FINRA arbitration for compensatory damages for $750,000, plus 9% interest per annum and $36,600 in witness fees for losses sustained from investments in the high-risk energy sector. The investors were clients of financial advisor Richard DeYoung (CRD# 863849).
Respondents are jointly and severally liable for and shall pay to Claimants interest on the above-stated sum at the rate of 9% per annum from November 23, 2015 through and including the date this Award is paid in full.
The causes of action included unsuitability, common law negligence, breach of contract, respondeat superior, control person and aider liability, and failure to supervise. The causes of action related to Claimants’ allegation that Wells Fargo, through DeYoung, recommended unsuitable investments in highly speculative oil and gas companies, including Breitburn Energy Partners L.P. and Linn Energy, Inc., resulting in significant losses to Claimants’ accounts. The FINRA arbitration hearing was conducted in Houston, Texas.
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, including the values of Breitburn Energy Partners L.P. and Linn Energy, Inc. 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.
DeYoung has been registered with Wells Fargo Clearing Services, LLC in Houston, Texas since 2012. Previously, DeYoung was registered with Banc Of America Investment Services, Inc. in The Woodlands, Texas from January to October 2009, with LPL Financial Corporation Houston, Texas from 2009 to 2009, and with UBS Painewebber Inc. in Weehawken, New Jersey from 2000 to 2002, when he was terminated regarding, “1 correspondence violation, 1 order error, and customer extentions.”
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 may be liable for investment or other losses suffered by DeYoung’s customers.
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