Wells Fargo Advisors LLC admitted it failed to maintain adequate controls to prevent one of its brokers, Miami-based Waldyr Da Silva Prado Neto, from trading on inside information.
The Securities and Exchange Commission subsequently fined Wells Fargo $5 million for failing to protect the confidentiality of a customer's material nonpublic information in what is the first-ever penalty against a broker-dealer for this brand of misconduct.
The SEC's order against Wells Fargo noted that the firm itself knew of the risk of personnel, such as brokers, misusing clients' confidential information.
Nonetheless, when a customer stated, in confidence, to broker Prado that Burger King was being acquired by a New York-based private equity firm, Prado traded on that private information prior to the public announcement, resulting in insider trading charges filed against Prado, whose assets were frozen in order to prevent Prado from transferring assets outside of U.S. jurisdiction. Prado is a citizen of Brazil.
The investigation states that although multiple groups responsible for compliance and supervision within the firm received indications that Prado was misusing customer information, those groups lacked coordination within the firm structure and, ultimately, failed to act on the indications.
Charged with impeding the SEC's investigation by unreasonably delaying its production of requested documents and by actually altering a requested compliance document, Wells Fargo agreed to settle the SEC's charges for a $5 million penalty for failure to protect a customer's nonpublic information while also agreeing to admit wrongdoing.
If you have invested with Waldyr Da Silva Prado Neto, Wells Fargo Advisors, or with any other broker or firm whose failure to protect your material nonpublic information or failure to maintain confidentiality has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.
Press Release: Wells Fargo Advisors Admits Failing to Maintain Controls and Producing Altered Document, Agrees to Pay $5 Million Penalty (US Securities and Exchange Commission)