The Securites and Exchange Commission said Monday that Wells Fargo Advisors (WFC) will pay $5 million for failing “to maintain adequate controls to prevent one of its employees from insider trading based on a customer’s nonpublic information.”
The SEC also charged the bank with “unreasonably delaying its production of documents during the SEC’s investigation and providing an altered internal document related to a compliance review of the broker’s trading.”
According to the SEC, Wells Fargo admitted wrongdoing in the case.
“When investors entrust private information to their stockbrokers or investment advisors, they have the right to expect that it will not be exploited,” said Andrew J. Ceresney, director of the SEC’s enforcement division, in a press release.
“In this case — our first against a broker-dealer for failing to protect the nonpublic information conveyed by its customers — Wells Fargo failed to implement procedures to prevent misuse of such information,” Ceresney explained.
(The bank declined to comment on the matter.)
In its own documents, Wells Fargo highlighted the risk of its employees misusing confidential information obtained from retail customers and clients, according to regulators. The bank says one of its staff members learned confidentially from a client that Burger King was being acquired by a New York-based private equity firm and then traded on that nonpublic information ahead of the announcement.
In 2012, the SEC charged Waldyr Da Silva Prado Neto, a citizen of Brazil working at the time for Wells Fargo in Miami, with illegally trading in Burger King stock for $175,000 in illicit profits. He also tipped off others living in Brazil and elsewhere, who were able to trade on the nonpublic information.
‘Failed to Act’