The Financial Industry Regulatory Authority has fined Wells Fargo Clearing Services $275,000 for failing to establish and maintain a supervisory system related to municipal advisory activity.
According to FINRA's order, from at least June 2019 to November 2024, Wells Fargo failed to establish and maintain a supervisory system, including written supervisory procedures, that was reasonably designed to achieve compliance with Section 15B(a)(1)(B) of the Securities Exchange Act of 1934, which prohibits unregistered municipal advisory activity.
As a result, Wells Fargo violated MSRB Rule G-27 and FINRA Rules 3110(a) and (b) and 2010. For these violations, FINRA censured and fined Wells Fargo $275,000, $137,500 of which pertains to violations of MSRB Rule G27.
During the period from at least June 2019 to November 2024, "Wells Fargo had hundreds of municipal entity customers who transacted in municipal and non-municipal securities in their firm accounts, but the firm was not registered as a municipal advisor," the order states.
In addition, the bank “did not establish and maintain a supervisory system, including WSPs, that was reasonably designed to ensure that the firm’s and its associated persons’ investment-related activities did not require the firm to register as a municipal advisor,” according to FINRA.
The bank did not establish and maintain a supervisory system, including WSPs, "that was reasonably designed to ensure that the firm’s and its associated persons’ investment-related activities did not require the firm to register as a municipal advisor," the order states.
"Although Wells Fargo’s WSPs prohibited its associated persons from advising municipal entities about investing proceeds from the issuance of municipal securities, the firm did not provide guidance to its associated persons about what constituted providing such advice and what other activities require municipal advisor registration," says the order.
The bank also did not have "any process for identifying whether deposits in municipal entities’ accounts were proceeds from the issuance of municipal securities and did not implement controls to detect and prevent associated persons from giving advice to municipal entities about investing proceeds from the issuance of municipal securities," the order continues.
In November 2024, "Wells Fargo took steps to modify its supervisory system, including its WSPs, relating to municipal advisory activity," the order states.
Wells Fargo said Wednesday in a statement shared with ThinkAdvisor: “As acknowledged by FINRA, we implemented changes in 2024 to the relevant supervisory systems, and we are pleased to resolve this matter.”
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