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Wells Fargo Advisors On the Hook for $3.5M Fine

By Alex Padalka November 14, 2017

The SEC has fined Wells Fargo Advisors $3.5 million for alleged failures in complying with anti-money laundering rules, according to an administrative proceedings document from the regulator.

From March 2012 to June 2013, the brokerage allegedly failed to file, or filed late, 50 so-called “Suspicious Activity Reports” required by the U.S. Treasury Department’s Financial Crimes Enforcement Network and the Bank Secrecy Act, according to the SEC. The suspicious movements in question mostly took place in international customers’ accounts held at Wells Fargo Advisors’ U.S. offices, the regulator says. The failures were apparently due to “confusion” created by new management over the company’s anti-money laundering program, according to the SEC.

Wells Fargo Advisors, which neither admitted or denied the regulator’s findings, allegedly told its SAR investigators that they were filing too many SARs, that filing the reports required proof of illegal activity, and that SAR reviews of continuing activity weren’t a requirement, says the SEC. The investigators were also to take steps to eliminate such reports, the regulator says. Continuing activity SARs made up 45 of the 50 SARs that were never filed or filed late, according to the SEC. Wells Fargo Advisors’ SAR filings dropped off around 60% during the 11-month period in question, the regulator alleges. The firm agreed to a cease-and-desist order, a censure, and the $3.5 million civil penalty, as well as to update its policies and administer more training, the SEC says.

Separately, Finra has fined a former Wells Fargo Advisors rep $10,000 and suspended him for two months over his failure to inform the firm that he had been appointed a co-executor and beneficiary of a client’s estate, according to an acceptance, waiver and consent document from the industry’s self-regulator.

Cecil Byers had served one of his clients, identified only as “HI,” for 30 years by the time she died in 2014, according to Finra. He learned that she had appointed him as co-executor and a beneficiary two days before her death, but he failed to disclose this to Wells Fargo Advisors. The firm requires its reps to get permission from compliance before accepting such appointments, the regular says. The firm learned of the appointment less than two months later through a probate litigation notice related to HI’s estate that objected to Byers’ position, according to Finra.

Byers removed himself from the position as soon as the probate petition was filed and didn’t inherit any of HI’s estate, the regulator says.

Byers resigned voluntarily from Wells Fargo Advisors in July 2015 and has been registered with Sunbelt Securities since then, according to his BrokerCheck profile. He had started in the industry in 1975 at Merrill Lynch and has two other customer disputes dating back to 1989, both of which have been settled, according to BrokerCheck.