Wells Fargo Compliance Officer Charged With Altering Document
The acquisition of Burger King by 3G Capital Partners is the matter that just keeps on giving – at least for SEC enforcement. Initially, the Commission brought an action against Wells Fargo broker Waldyr Da Silva Prado Neto, who misappropriated inside information about the transaction from a client, tipped others who traded and traded for his own account. SEC v. Prado, Civil Action No. 12-CIV-7094 (S.D.N.Y. Sept. 20, 2012); see also U.S. v. Prado, Case No. 13-mg-2201 (S.D.N.Y. Sept. 13, 2013). Then the Commission brought an action against Wells Fargo for failing to establish and enforce procedures to prevent the misuse of material, non-public information. In the Matter of Wells Fargo Advisors, LLC., Adm. Proc. File No. 3-16153 (Sept. 22, 2014). Now the Commission has instituted an administrative proceeding against a former Wells Fargo compliance officer for altering a record produced to the staff in connection with its investigation of the broker. In the Matter of Judy K. Wolf, Adm. Proc. File No. 3-016195 (October 15, 2014).
Ms. Wolf was a compliance consultant for Wells Fargo Advisors prior to her termination in June 2013. In 2009 she drafted the firm’s policies and procedures governing how “look back” reviews would be conducted. Ms. Wolf was the sole compliance officer conducting these reviews. Most of her reviews closed with “no findings.” A log of those inquiries was maintained, although it did not specify the reason for terminating the inquiry.
On September 2, 2010, the day the Burger King deal was announced, Ms. Wolf began a look back review of the trading surrounding the deal. She concluded that: 1) Mr. Prado and his customers represented the top four positions in Burger King securities firm-wide; 2) Mr. Prado and his customers purchased Burger King stock within 10 days of the announcement; 3) Mr. Prado and his customers each had profits that exceeded the $5,0000 threshold specified in the look back review procedures; 4) Mr. Prado and Burger King were located in Miami; and 5) Mr. Prado, his customers and the acquiring company were all Brazilian. News articles about the event were not printed and included in the file despite a provision in the procedures requiring this step. The review was closed and therefore not forwarded to the branch manager. Supervisors at Wells Fargo did not learn about the review until two years later when the SEC filed its insider trading action against Mr. Prado.
In July 2012 the Commission requested as part of its on-going investigation, that Wells Fargo produce its compliance files relating to Mr. Prado. Although the production was eventually certified as complete, it did not include Ms. Wolf’s file. When a second request was made in January 2013, that file was included in the production. Ms. Wolf’s log stated “09/02/10 opened 24%
Ms. Wolf provided contradictory testimony during the investigation. Initially, she testified that the file had not been altered. She claimed that the date of 9/1/12 in the sentence quoted above was a typo. In addition, Ms. Wolf stated that the news articles were a primary reason for closing the file. Later Wells Fargo produced documents indicating that the Burger King log entry had been altered on December 28, 2012. A prior version of the log was produced that did not contain the sentence quoted above along with the metadata.
Following her termination from Wells Fargo the Commission took Ms. Wolf’s testimony a second time. During the testimony she admitted altering the log.
The Order alleges violations of Exchange Act Section 17(a) and the related rules. The proceeding will be set for hearing.