The Financial Industry Regulatory Authority (FINRA) fined Wells Fargo & Co. (NYSE: WFC) $2 million for failing to supervise its top salesperson of reverse convertibles, who recommended derivatives as appropriate investments to elderly investors.

The salesperson, Alfred Chi Chen, generated more than $1 million in commissions in 2008 when he sold what’s described as hundreds of reverse convertibles to elderly investors. Reverse convertibles are short-term bonds that convert into common stock if the company’s share price declines significantly. FINRA said that Chen also made several unauthorized trades on customer accounts.

The $2 million fine comes as financial regulators are increasing their scrutiny of structured products sold to individual investors. Large banks create structured notes and recommend them as an alternative to directly buying stocks and bonds. Sales of structured products, including derivatives, hit a record of $49.5 billion in 2010.

FINRA is requiring Wells Fargo to pay restitution to customers that were sold investments between 2006 and 2008 that are considered unsuitable .  “Wells Fargo failed to review reverse convertible transactions to ensure they were suitable,” said FINRA enforcement Chief Brad Bennett in a statement.

Wells Fargo spokesman Vince Scanlon said in an emailed statement to Bloomberg that  “Wells Fargo Advisors will continue to support the processes and procedures in place to prevent this kind of activity from happening…We are glad to have this behind us.”

The Securities and Exchange Commission did an investigation earlier this year into the sale of structured products. The SEC announced the results of its investigation in July and said that brokers may have taken advantage of some investors. The SEC has said that it continues to monitor the market and may take additional steps to ensure that derivatives are not sold to investors that do not meet the suitability requirements of purchasing them.

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