Altered docs land former Wells compliance officer in hot water

The Securities and Exchange Commission announced Wednesday that it was taking enforcement action against a former compliance officer at Wells Fargo Advisors who allegedly altered a document before it was provided to the SEC during its investigation into a former broker’s insider trading.
The charges stem from the case of Waldyr Da Silva Prado Neto, whose alleged scheme made more than $2 million from insider trades in Burger King Holdings Inc. stock ahead of an acquisition announcement on Sept. 2, 2010.
(More: Read the original story on this ex-Wells Fargo broker’s insider beef)
The SEC said that after it charged Mr. Prado in September 2012, Judy K. Wolf, who was responsible for identifying potentially suspicious trading activity at Wells Fargo Advisors, went back and revised a 2010 report to make it appear that she had performed a more thorough review of Mr. Prado.
Initially, she had closed the report into Mr. Prado’s Burger King trades with “no findings” and did not notify any superiors of potential red flags, the SEC said.
The SEC said in its action that Ms. Wolf should have reported multiple red flags that were noted, including that Mr. Prado and his customers represented the top four positions in Burger King Securities firmwide, he and his customers purchased the securities within 10 days of the announcement, made substantial profits and that he, his customers and the company acquiring Burger King were all Brazilian.
In the later update, Ms. Wolf attempted to provide an additional reason for closing the review, primarily that there were news articles circulating for several weeks prior to the announcement, the SEC said. Those justifications were not included in the original September 2010 file, however, according to the complaint.
(Related: 5 compliance lessons from recent SEC cases)
“We allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit.
Last month, Wells Fargo paid $5 million and admitted wrongdoing to settle the SEC’s allegations that it failed to properly supervise Mr. Prado and that it had submitted altered documents to SEC investigators.
“Wolf’s alteration of the document, which Wells Fargo Advisors then produced to commission staff, was a cause of, and willfully aided and abetted, Wells Fargo Advisors’ violations,” the SEC said.
The SEC said in last month’s settlement with the firm that Wells Fargo had also delayed handing over September 2010 report.
“Wells Fargo certified that its production [of documents] was complete in early September 2012, but the production did not contain any of Wolf’s” files, according to the complaint.
A spokesman for the firm, Anthony Mattera, declined to comment on the case.
The firm placed Ms. Wolf on administrative leave in March 2013 and terminated her employment in June 2013, the SEC said.
In January, the SEC ordered Mr. Prado, who since fled to Brazil, to pay $5.6 million.
Ms. Wolf has 20 days to file an answer to the SEC’s allegations, and any remedial action will ultimately be up to one of the SEC’s administrative law judges.

Related Topics: Wells Fargo & Co.