Wells Fargo unit fined $425K by FINRA over trade disclosures

Wells Fargo Securities’ supervisory system was not reasonably designed to achieve compliance with Exchange Act Rule 10b-10 and FINRA Rule 2232, the self-regulatory organization said in its disciplinary action published Friday.

The details: From June 2015 to August 2021, Wells Fargo sent institutional customers approximately 2.27 million trade confirmations that did not disclose, for orders effected via multiple executions, the prices reported were average prices and that details on the average prices could be provided upon request, according to FINRA.

The deficiencies were the result of a missing trailer code in a legacy version of an order management system used by one of the firm’s trading desks, per FINRA. Wells Fargo discovered the coding error in October 2020 while conducting an unrelated review. After reviewing the matter, the firm disclosed the issue to FINRA in August 2021 and began remediation.

Compliance considerations: FINRA faulted the firm for its supervisory systems not incorporating into monthly reviews of trade confirmations a specific review for average price disclosures until July 2020. The organization also criticized the firm regarding how long it took for it to fix the issue after discovery in October 2020.

“[E]ven after discovering the issue, the firm continued for approximately 10 months to send trade confirmations to institutional customers that omitted the required average price disclosures,” the order said.

In November 2015, Wells Fargo Securities was fined $300,000 by FINRA for issues regarding its supervision of trade confirmations.

Firm response: “We have fully cooperated with FINRA, and we are pleased to have resolved this matter, which we self-identified and self-reported,” said a Wells Fargo spokesperson in an emailed statement.