(Washington)

The scandal for Wells Fargo’s wealth management division is deepening. The bank has already experienced major reputational damage following its checking account scandal, and now the US Department of Justice is investigating the wealth management division’s alleged misconduct. The move is part of an extension of the investigation into the retail banking misconduct, and the FBI is reportedly holding interviews in the Phoenix area. Earlier this month the bank disclosed its own independent review of its wealth management unit included “whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business”.

FINSUM: This scandal looks like it is going to keep moving deeper and deeper. We wonder how much damage this might ultimately have on Wells Advisors’ own businesses. This seems like a situation where advisors might be seen by clients as guilty by association.

(Washington)

This weekend saw President Trump escalate his attacks on Robert Mueller’s special counsel investigation. Trump and his lawyers launched a public campaign to condemn the investigation which included Trump’s first tweets targeting Mueller by name. Trump tweeted that the investigation “should never have been started in that there was no collusion and there was no crime”, saying that the Mueller investigation was being led by “hardened Democrats” intent on taking down the Republican president. Trump’s more aggressive stance than in previous months led to several warnings from senators on both sides of the aisle that he should not try to end the investigation.

FINSUM: One keeps wondering if some bombshell accusation is going to arise from this investigation or whether it will end up being a long waste of time.

(Frankfurt)

For investors looking for signs of bad things to come, this is a pretty strong one. US investors may need to focus overseas to see what’s coming, as Germany’s benchmark DAX index has just hit a “death cross”, or when the 50-day moving average falls below the 200-day moving average. This has only happened to the DAX four times in the last decade, and in all of the instances the market fell at least a further ten percent after the cross.

FINSUM: So the DAX is partly down because of the country’s exposure to a trade war, but it could be a first manifestation of what is to come for global markets.

(Washington)

If the fiduciary rule was on its last legs before, it is really in trouble now. The DOL’s rule suffered its first significant court defeat this week. A US circuit court struck down the rule, saying it was too broad and “unreasonable”. The court found fault with the government’s broadened definition of what constitutes financial advice and who gives it. The loss means circuit courts have split on the fiduciary rule and it now appears likely the Supreme Court will take up the case.

FINSUM: This is a major blow to the fiduciary rule, and may help usher an even quicker departure for it. It will certainly give the DOL more ground to shift to a new rule co-drafted with the SEC.

(Washington)

Special counsel Robert Mueller may very well have just crossed one of Trump’s red lines in his investigation into the White House’s connections to Russia. Mueller has just subpoenaed the Trump organization. The Trump organization has been voluntarily giving the special counsel documents to assist with its investigation, but now faces an official subpoena. The tactic mirrors the approach used by Mueller during his investigation into the White House itself. The story of the subpoena was first issued by the New York Times.

FINSUM: It will be interesting to see how sharply, if at all, Trump reacts to this move. Is this the action that moves him to try to end the investigation?