FINRA Fines Wells Fargo $3.25M Over OTC Options Trading Reporting

The Financial Industry Regulatory Authority is ordering Wells Fargo Securities (WFC) to pay a $3.25M fine for inaccuracies and mistakes in its reporting for over-the-counter trades that took place between January 2008 and March 2017. The self-regulatory organization also has censured the firm.

According to FINRA, in 2008, Wells Fargo (WFC) reviewed its OTC options trading reporting procedures. It went on to set up systems for reporting these types of trades. However, the firm’s reporting system was never fully established.

Wells Fargo Securities did not actually start reporting OTC options trades until after the firm achieved self-clearing status in 2014. Even then, claims the SRO, Wells Fargo either did not report or was inaccurate when reporting quite a number of these trades.

FINRA also said that the firm’s supervisory procedures were “deficient.”

OTC Options
These are private transactions involving two parties. They are typically traded in an arena other than a formal exchange. Compared to trading on a major exchange, with OTC trading there may be more regulations and less transparency involved. This could make the trades more vulnerable to unexpected risks.

OTC options trading may not be ideal for the inexperienced investor or someone who cannot handle too much risk or loss to their portfolio. It is important that financial firms and their representatives only make trading recommendations that are suitable for each client.

In other Wells Fargo related-news, the bank, which has been fighting to regain customer trust after opening two million accounts without the customers knowing, is now dealing with US Senator Elizabeth Warren calling on the Federal Reserve to get rid of the bank’s entire 12-member board. Warren noted that the board had failed to properly monitor Wells Fargo’s risk management practices.

At Shepherd Smith Edwards and Kantas, LTD LLP, we represent investors with securities fraud claims against brokers, investment advisors, and financial firms. More than 90% of those who have retained our legal services have recovered either all or part of their investment losses. Contact us today.

Finra fines Wells Fargo $3.25 million for options trade reporting violations, InvestmentNews, June 22, 2017

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