Wells Fargo’s brokerage subsidiary has been fined $425,000 by the Financial Industry Regulatory Authority (Finra) for allegedly misreporting trade prices on millions of client transactions. Wells Fargo agreed to the fine and a censure under an agreement with the regulator in which it neither admitted to nor denied the charges.
According to FINRA, From June 2015 to August 2021, the bank’s brokerage unit sent about 2.27 million trade confirmations to customers that failed to disclose that for orders containing multiple executions trade prices reflected average prices, Finra said. The bank also failed to disclose that actual execution prices were available upon request, the regulator said. Finra also says that the bank discovered the problem in 2020 but failed to address the issue until almost a year later. In addition, the firm’s supervisory system was not reasonably designed to achieve compliance with a multitude of securities laws, Finra alleged.
Specifically, Wells Fargo Securities’ written supervisory procedures required a monthly review of a specified sample of trade confirmations, but did not expressly require a review to ensure that the firm included average-price disclosures in confirmations for orders effected via multiple executions at multiple prices, Finra said.
As a result, a system coding error that impacted one trading desk (the “Outsourced Trading Services Desk”) at the firm, went undetected for over five years.
Wells Fargo reported the issue in August 2021, 10 months after discovering the error, which was discovered while conducting an unrelated review in October 2020, Finra said.
Even after discovering the problem, “the firm continued its efforts to transition customers to a different order management system, but did not otherwise take steps to timely fix the issue until August 2021. As a result, even after discovering the issue, the firm continued for approximately 10 months to send trade confirmations to customers that omitted the required average-price disclosures,” the regulator added.
Jeffrey Newman Esq. and members of his firm represent whistleblowers under the SEC, CFTC and FINCEN whistleblower programs. Persons providing original information to these agencies through counsel may receive rewards totaling up to 30 percent of a successful recovery made by the SEC, CFTC OR FINCEN and the names and identification of the whistleblowers are kept confidential. His firm also represents whistleblowers in healthcare fraud cases relating to Medicare of Medicaid. Attorney Newman can be reached at Jeff@Jeffnewmanlaw.com or at 617-823-3217
