FINRA fines Wells Fargo for inaccurate order receipt time reports
Wells Fargo Clearing Services has agreed to pay a fine of $75,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).
From October 1, 2016, through June 12, 2018, Wells Fargo failed to make accurate order memoranda and transmitted inaccurate reports to the Order Audit Trail System (OATS).
In particular, from October 1, 2016, through June 12, 2018, the firm failed to make and preserve accurate books and records as prescribed by Exchange Act Rule 17a-3(a)(6) and FINRA Rule 4511. Specifically, the firm failed to record an accurate order receipt time in certain situations when registered representatives entered the order receipt time manually.
Generally, orders were entered into the firm’s system immediately upon receipt from the customer, and the system automatically appended the order receipt time and order entry time to the order record. In some instances, when the order was not immediately entered into the firm’s system, the registered representative first had to record the order on paper, and then enter all the terms and conditions, including manually entering the order receipt time, into the system.
Wells Fargo’s registered representatives entered inaccurate order receipt times in different ways. Although OATS requires reporting in eastern military time, some of the firm’s registered representatives entered order times reflecting another time zone or in 12-hour time. In addition, some of Wells Fargo’s registered representatives entered orders with “00” seconds in the time stamp when “00” seconds was inaccurate.
Respondent recorded inaccurate order receipt times on 114,394 order memoranda.
In addition, Respondent populated the order receipt time field in its OATS submissions with the time that was entered in its order management system. Thus, the inclusion of inaccurate receipt times in Wells Fargo’s system also caused the firm to submit 114,394 inaccurate submissions to OATS.
Also, during the fourth quarter of 2016, the firm also failed to report a desk receipt time stamp to OATS in 38 instances out of a sample of 50. The failure to report was caused by an automation issue; Respondent’s system was not set up to report desk receipt times to OATS.
Finally, during the fourth quarter of 2016, for seven orders out of a sample of 50, Wells Fargo reported the orders to OATS with an Account Type Code “X,” which is used when an order is originated in a firm’s error account. These instances involved trade corrections of customer orders, but Respondent failed to submit reports with the Account Type Code “I” for the customer orders that were corrected.
On top of the fine, the firm has agreed to a censure.