(FINRA Case #2014040326101)
Wells Fargo Securities, LLC (CRD #126292, Charlotte, North Carolina) – An AWC (Accept Waiver & Consent) was issued in which the firm was censured, fined $3,250,000, and required to review its supervisory systems and processes.
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to report all of its reportable conventional options positions for an unknown but significant period of time because of the firm’s erroneous belief that the positions were not reportable and then, after determining that the firm would begin reporting these positions, the firm failed to develop and implement a Large Options Position Report (LOPR) system.
The findings stated that after identifying and remediating the firm’s failure to report reportable conventional options positions to LOPR, FINRA determined that the firm still failed to accurately report an unknown but significant number of conventional options positions to the LOPR. The findings also stated that the firm and a customer exceeded the over-the-counter (OTC) position limit by 25 percent for at least 461 trading dates in options related to one security, and by 40 percent for two trading dates in options related to another security. The firm had not detected these violations because of its LOPR-related deficiencies.
FINRA found that, until 2014, the firm failed to maintain any type of system of supervision, including systems of follow-up and review, which were designed to achieve compliance with the rules governing the reporting of conventional options positions to the LOPR system. The firm also lacked any relevant WSPs (Written Supervisory Policies) requiring relevant reviews. After implementing supervisory systems and WSPs (Written Supervisory Policies) pertaining to the reporting of conventional options to LOPR, the firm still failed to adequately supervise by failing to detect errors in numerous conventional options positions reported to the LOPR. The firm did not have an adequate system of supervision, including systems of follow-up and review and relevant WSPs (Written Supervisory Policies), reasonably designed to achieve compliance with rules related to the exercise of physically settled OTC options.
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