Recently, the SEC filed an Enforcement Action against a former Wells Fargo Advisors Compliance Officer.
According to the SEC, the Compliance Officer, Judy K. Wolf, was responsible for performing trading surveillance reviews to identify potential insider trading activity.
Wolf ‘s September 2010 surveillance review of a particular employee’s trading found no issues.
Apparently, in December 2012, after the SEC charged Wells Fargo Advisors with insider trading, Wolf revised her September 2010 surveillance review.
The SEC’s Enforcement Action sets forth that by altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.
Daniel Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit declared: “regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”
Don’t Forge Documents You Give to SEC Investigators
You’re bound to make a mistake. Don’t make the mistake even worse by faking a document you submit to the Securities and Exchange Commission in order to cover your original mistake.
Back in 2012, the SEC brought charges against Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami. He was accused of illegally trading in the stock of Burger King after he learned of an impending private equity transaction.
Wells Fargo admitted to compliance weaknesses and paid a $5 million fine in connection with that supervision failure. In connection with that failure’s administrative order, the SEC expressed its displeasure with a delay in production of the documents and the state of the documents.
When the documents were produced, the firm failed to produce an accurate record of the review as it existed at the time of the staff’s request. Instead, the firm produced a document that had been altered by an employee after the Commission staff issued its follow up request. When questions arose surrounding the altered document, Wells Fargo Advisors placed the employee on administrative leave and eventually terminated this employee.
That failure probably resulted in the SEC enforcement action and a bigger fine for Wells Fargo.
The SEC brought charges against Judy K. Wolf, the ex-Wells Fargo employee, for faking the document.
The SEC alleges that Wolf was responsible for reviewing Waldyr Da Silva Prado Neto trading records in 2010 in connection with the Burger King trades. She reviewed the trading records and closed her review with no findings. The SEC alleges that Wolf altered her review report in 2012 after the insider trading charges were filed. She made it look like her review was more thorough than it actually was.
The Order notes some of the red flags according to the Wells Fargo “look back” policy:
- Prado and his customers represented the top four positions in Burger King securities firm-wide;
- Prado and his customers bought Burger King securities within 10 days before the acquisition announcement, including on the same days;
- The profits by Prado and his customers each exceeded the $5,000 threshold specified in the look back review procedures;
What did her in was an additional note in the log:
“09/02/10 opened 24% higher@ $23.35 vs. previous close of $18.86. Rumours of acquisition by a private equity group had been circulating for several weeks prior to the announcement. The
stock price was up 15% on 9/1/12, the day prior to the announcement.”
Wolf made a typo on the announcement date.
According to the order, she argued that it was merely a contemporaneous type, but admitted in later testimony that she had made that additional log note after the SEC investigation. Wells Fargo was able to produce earlier copies of the log that did not have those two sentences.
Wolf tried covering her mistake, but it blew up into a bigger problem. Wells Fargo fired her and the SEC brought charges against her personally.
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