Wells Fargo Fined $275,000 for Failure to Register as Municipal Advisor

Wells Fargo's investment arm has been fined $275,000 by the Financial Industry Regulatory Authority (FINRA) for failing to comply with rules regarding municipal advisory activity. The firm acknowledged that it had hundreds of municipal entity customers but was not registered as a municipal advisor. Wells Fargo has agreed to pay the fine and will not face future actions related to the violation.

Wells Fargo Clearing Services has agreed to pay $275,000 to settle allegations by the Financial Industry Regulatory Authority (FINRA) regarding violations of municipal securities rules. The fine, which includes a $137,500 payment for alleged violations of Municipal Securities Rulemaking Board (MSRB) Rule G-27, was part of a broader settlement that also resulted in Wells Fargo being censured [1].

According to the settlement document accepted by FINRA on August 11, Wells Fargo failed to establish and maintain a supervisory system that was reasonably designed to ensure compliance with federal securities laws prohibiting unregistered municipal advisory activity. This period, from at least June 2019 to November 2024, saw Wells Fargo having hundreds of municipal entity customers who transacted in municipal and non-municipal securities without the firm being registered as a municipal advisor [1].

The settlement document noted that Wells Fargo did not provide clear guidance to its associated persons regarding what constituted providing advice on investing proceeds from the issuance of municipal securities and lacked processes to identify and prevent such activities. The firm also did not institute controls to detect and prevent associated persons from advising municipal entities on how to invest such proceeds [1].

Despite these violations, Wells Fargo has agreed to modify its supervisory system and written supervisory procedures (WSPs) relating to municipal advisory activity. The firm also consented to FINRA's findings without admitting or denying them [1].

This settlement comes amidst broader regulatory scrutiny of Wells Fargo, including a lawsuit filed by New York Attorney General Letitia James against Zelle, a popular payment service offered by the bank. The lawsuit accuses Zelle of falling short in protecting users from fraud, with the Attorney General's office stating that the service was designed without critical safety features, allowing scammers to steal over $1 billion between 2017 and 2023 [2].

While the lawsuit against Zelle does not directly impact Wells Fargo's investment arm, it highlights the bank's ongoing regulatory challenges and potential reputational risks. Investors should monitor these developments closely as they may influence the bank's stock performance and overall financial health.

References:
[1] https://www.bondbuyer.com/news/finra-fines-wells-fargo-137-500-for-alleged-violations-related-to-unregistered-advisor-activity
[2] https://finance.yahoo.com/news/why-wells-fargo-stock-wilted-224000718.html