The Financial Industry Regulatory Authority (FINRA) has imposed a fine of $200,000 on Wells Fargo Securities primarily for overstating its advertised trade volume on Bloomberg and Thomson Reuters. In addition, the regulatory action involves a censure order.
Moreover, the violations by the company include a failure to establish and maintain a supervisory system. Wells Fargo has already agreed to pay the monetary penalty and settle the charges with the self-regulatory agency.
The Letter of Waiver, Acceptance, and Consent (AWC) published on Thursday detailed that Wells Fargo violated the regulatory rules from December 2016 until June 2018. Its configured systems automatically advertised daily trading volumes in numerous securities through two third-party service providers. However, two technological misconfigurations resulted in overstated trade volumes.
Wells Fargo Settlements for Two Significant Errors
One of the errors, which was in place for the entire period, resulted in overstating the trade volume in 4,597 instances, affecting 32,935,787 shares across 901 securities. Another misconfiguration of the order management system was caused by the firm’s trading desks between June 12 and October 11, 2017, resulting in the trading volume overstatement in 5,623 instances. It resulted in the overstatement of 114,888,829 shares across 3,036 securities.
Overall, the two misconfigurations of Wells Fargo resulted in the trading volume overstatement by nearly 148,000,000 shares in more than 10,000 instances.
“Additionally, the firm failed to perform any testing of options trades or multi-leg trades to ensure that the_ non-equity components were properly excluded from advertisement as · intended, nor did the firm test to ensure that such trades were otherwise advertised correctly,” FINRA stated in the AWC letter.
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Earlier this year, another subsidiary of the Wells Fargo Group, Wells Fargo Advisors, settled with the Securities and Exchange Commission for the violation of anti-money laundering provisions by paying $7 million.
Meanwhile, FINRA continues its supervisory activities and cracking down on regulatory violations. Recently, it slammed a fine of $165,000 on Instinet and another $360,000 on RBC Capital Markets for supervisory failures.
