On October 15 The Securities and Exchange Commission (“SEC”) reported enforcement against a former Wells Fargo Advisors’ (“Wells Fargo”) compliance officer.
Purportedly, Judy K. Wolf altered a document before submitting it to the SEC during an investigation. The SEC’s order states that “she was responsible for identifying potentially suspicious trading by Wells Fargo personnel or the firm’s customers and clients and then analyzing whether the trades may have been based on material nonpublic information.”
After reviewing a particular Wells Fargo broker’s trading, Wolf crafted a document stating there were no findings during the review. In December 2012, two years after the initial review and after the SEC charged the broker with insider trading, allegedly, she altered the documents. Purportedly, the alterations made by Wolf reflected a “more thorough review in 2010 than she actually had.”
“We allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”
When interrogated about the documents, Wolfe initially denied the accusations. However, in a later testimony, she confessed to her wrongdoing. After being placed on administrative leave, she was ultimately terminated.
In September of 2014, Wells Fargo agreed to pay $5 million to settle these and other violations of securities laws.
“The SEC Enforcement Division alleges that Wolf, who lives in St. Louis, willfully aided and abetted and caused Wells Fargo to violate Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4(j) as well as Rule 204(a) under the Investment Advisers Act of 1940.”
While providing supplemental information to the SEC is acceptable, altering firm books and records is not. It is important to work with professional consultants including legal counsel and compliance consultants whenever responding to regulatory requests.
For further information on this and other related subjects, please contact us at (619) 278-0020 to schedule a consultation. Also, visit the Risk Management Updates section of the website for more wordsmithing on other regulatory compliance considerations.
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