Assignment Task: Can you explain.
Find and research a current event about an unethical practice in a U.S. capital market
Unethical events, sometimes unknown, may happen within the workplace on a daily basis and at any level of employment. To help mitigate this, the CFA Institute has created a Code of Ethics and Standards of Professional Conduct, set to make an ethical benchmark for financial professionals around the globe (CFA, n.d.). Additionally, businesses have created compliance departments that set forth a series of rules that must be followed when performing business. With that being said, a financial firm that has been recently inundated with claims of unethical practices is Wells Fargo. Recently, it has been in the spotlight of financial regulators, consumers, and investors, and has been forced to pay hundreds of millions of dollars in fines and penalties.
In 2016, Wells Fargo was caught in a scandal highlighting its employee's use of unethical practices by creating millions of unauthorized bank and credit card accounts without the customer's knowledge (Wattles, Geier, & Egan, 2018). From an employee perspective, this style of sales was encouraged by managers and was a necessity in order to maintain employment with the firm and boost one's cross-sell ratio with the consumer, helping progress one's career. If this wasn't bad enough, it was also found that Wells Fargo retaliated against employees who tried to blow the whistle regarding these events. From here on, it only went downhill for Wells Fargo due to the Feds knowledge of its pervasive and persistent culture of misconduct (Fed, 2018).
To add to this, regulators at the Financial Industry Regulatory Authority (FINRA) had determined that Wells Fargo sold dangerous investments that its brokers did not fully understand to its customers, requiring it to pay restitution in the amount of $3.4 million. These financial products, known as volatility-linked products, were sold to consumers as a good way to protect portfolios, however, they were also known for being highly likely to lose value over time (Egan, 2017). Volatility-linked financial products are short-term trading products that will degrade over time, making them a poor choice to keep as a long-term buy-and-hold investment (Egan, 2017).