Brokerage firm Wells Fargo Advisors has admitted wrongdoing and agreed to a $5 million penalty to settle SEC allegations that Wells Faro failed to prevent one of its brokers from engaging in insider trading. The charges relate to former Wells Fargo broker Waldyr Da Silva Prado Neto. Mr. Neto was accused of insider trading after misusing confidential information he learned from a client that Burger King Holdings Inc. was being acquired by a New York private-equity firm.
The SEC said that Wells Fargo did not have proper procedures in place to recognize, report and address concerns that its brokers were engaged in improper conduct. According to the SEC, Wells Fargo failed to recognize several red flags that its broker was illegally using non-public information to buy Burger King securities. The SEC also found that Wells Fargo’s compliance department reviewed the trading, but failed to share the information with senior managers.
To make matters worse, the SEC stated that Wells Fargo delayed the SEC’s investigation by holding back requested documents and altering another record before sending it to the SEC. So it wasn’t bad enough that Wells Fargo failed to catch the broker’s illegal conduct. After learning of the conduct, rather than own up to its failures, it attempted to delay and deceive the SEC.
Dimond Kaplan & Rothstein, P.A. partner Scott Dimond serves as the SEC Receiver in the regulatory action that the SEC filed against Waldyr Da Silva Prado Neto.
