Wells Fargo Securities Censured & Fined for Supervisory Issues
According to FINRA, on June 21, 2017, Wells Fargo Securities, LLC (CRD #126292, Charlotte, North Carolina) was issued an AWC in which the firm was censured, fined $3,250,000, and required to review its supervisory systems and processes.
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to report all of its reportable conventional options positions for an unknown but significant period of time. Because of the firm’s reportedly erroneous belief that the positions were not reportable and after determining that the firm would begin reporting these positions, the firm reportedly failed to develop and implement a Large Options Position Report (LOPR) system.
FINRA stated that after identifying and remediating the firm’s failure to report reportable conventional options positions to LOPR, FINRA determined that the firm still failed to accurately report an unknown but significant number of conventional options positions to the LOPR.
Additionally, FINRA’s findings stated that the firm and a customer exceeded the over-the-counter (OTC) position limit by 25 percent for at least 461 trading dates in options related to one security, and by 40 percent for two trading dates in options related to another security. The firm reportedly had not detected these violations because of its LOPR-related deficiencies.
According to FINRA, Wells Fargo Securities failed to report an unknown—although small—number of physically settled OTC exercises to the FNTRF with an .RX modifier. FINRA found that, until 2014, the firm allegedly failed to maintain any type of system of supervision, including systems of follow-up and review, which were designed to achieve compliance with the rules governing the reporting of conventional options positions to the LOPR system.
The firm allegedly also lacked any relevant WSPs requiring relevant reviews. After implementing supervisory systems and WSPs pertaining to the reporting of conventional options to LOPR, the firm still failed to adequately supervise by failing to detect errors in numerous conventional options positions reported to the LOPR.
FINRA reports Wells Fargo Securities did not have an adequate system of supervision, including systems of follow-up and review and relevant WSPs, reasonably designed to achieve compliance with rules related to the exercise of physically settled OTC options.
For FINRA’s full findings see FINRA Case #2014040326101.
This information, which is publicly available on FINRA’s website, has been provided by The White Law Group.
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