The Financial Industry Regulatory Authority Inc. has censured Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network, and fined them $2.25 million for violating several books-and-records retention requirements.
In 2016, Finra found that from 2003 to December of 2016, when Wells Fargo executed a letter of acceptance, waiver and consent, the firm failed to maintain approximately one million electronic brokerage records in the required non-erasable and non-writable format known as WORM. It also failed to preserve various records, including at least 150,000 communications.
In 2017, Well Fargo certified to Finra that it had concluded a review of the relevant policies and procedures and had “adopted and implemented policies and procedures reasonably designed to achieve compliance with the applicable federal securities laws and Finra rules” addressed in the December 2016 agreement.
In April 2019, the two Wells Fargo firms began reviewing whether certain ongoing projects would have an impact on their Customer Identification Program records, which include risk-based procedures for verifying the identity of customers, as required by federal anti-money laundering regulations.
In connection with that review, the firms concluded in January 2020 that they were storing CIP records on a system that was not WORM-compliant. The firms self-reported the issue to Finra in April 2020, and by August 2020 they migrated the relevant records to a WORM-compliant platform.
Approximately 13 million CIP-related records, pertaining to approximately 8.2 million customers, were stored on the non-WORM compliant platform from 2003 to August 2020, with approximately 4 million documents having been stored on the firms’ non-WORM compliant platform after the firms discovered the issue in November 2016.
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