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Wells Fargo Advisors Pays $5 million Penalty Because of Insider Trading

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The Securities and Exchange Commission has charged Wells Fargo Advisors
with failing to maintain adequate controls to prevent a former broker from
trading illegally based on a customer’s nonpublic information. This is a
wrong related to “front-running” and insider trading.

Even more, the SEC also charged Wells Fargo with playing discovery games,
by delaying its production of documents during the SEC’s investigation.
Wells Fargo Advisors even is charged with providing an altered internal
document.

Wells Fargo Advisors, the nation’s third-largest retail brokerage firm,
agreed to pay a $5million penalty to the government to settle the SEC’s
charges. Just try to get a small charge reversed with Wells Fargo and you
can imagine how strong the evidence was in this matter.

This technical ground of the charges were that a brokerage with failing to
protect a retail customer’s confidential information really from being used
by the brokerage for its own benefit. Before, it has charged broker-dealers
with failing to safeguard material nonpublic information that was obtained
by it, such as from the firm’s investment bankers or stock analysts. But
to us, the really alarming part of the charges isn’t just the use of the
information, but that Wells Fargo Advisors would submit false information
to the SEC. In our litigated cases, we always push hard to obtain all the
required evidence, but the fabrication of evidence is something we are
always on guard against.

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