Wells Fargo Clearing Services, LLC has agreed to pay a fine of $275,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From at least June 2019 to November 2024, Wells Fargo had hundreds of municipal entity customers that transacted in municipal and non-municipal securities in their firm accounts, but the firm was not registered as a municipal advisor.

Wells Fargo did not establish and maintain a supervisory system, including written supervisory procedures (WSPs,) that was reasonably designed to ensure that the firm’s and its associated persons’ investment-related activities did not require the firm to register as a municipal advisor.

Although Wells Fargo’s WSPs prohibited its associated persons from advising municipal entities about investing proceeds from the issuance of municipal securities, the firm did not provide guidance to its associated persons about what constituted providing such advice and what other activities require municipal advisor registration.

Wells Fargo also did not have any process for identifying whether deposits in municipal entities’ accounts were proceeds from the issuance of municipal securities and did not implement controls to detect and prevent associated persons from giving advice to municipal entities about investing proceeds from the issuance of municipal securities.

While Wells Fargo relied on provisions in its client account agreement and disclosures provided to customers in their year-end account statements to help ensure municipal entities were not depositing proceeds from the issuance of municipal securities, these provisions and disclosures were not prominent.

Wells Fargo did not otherwise take reasonable steps to ensure that its services for municipal entities did not include providing advice on the investment of proceeds from the issuance of municipal securities and thus constitute municipal advisory activity.

In November 2024, Wells Fargo took steps to modify its supervisory system, including its WSPs, relating to municipal advisory activity.

By failing to establish and maintain a reasonable supervisory system and procedures, Wells Fargo violated MSRB Rule G-27 and FINRA Rules 3110(a) and (b) and 2010.

In addition to the $275,000 fine, the firm has agreed to a censure.