The SEC accused former Wells Fargo Advisors Compliance Officer Judy K. Wolf of altering documents pertaining to a 2010 insider trading scheme in order to make it appear that she, as a compliance official, had performed a more thorough review of a rogue broker.
The SEC's original case against Wells Fargo and Miami-based Waldyr Da Silva Prado Neto resulted in a $5 million fine for Wells Fargo's failure to protect a customer's material nonpublic information. That report uncovered that upon learning of privileged and confidential information concerning a New York firm's impending acquisition of Burger King, broker Prado effected an insider trading scheme that ultimately netted Prado over $2 million.
The Commission's present report states that as a Wells Fargo Advisors compliance official, part of Wolf's job was to identify suspicious trading activity, including reviews of brokers and advisors with potential red flags.
According to the investigation, Wolf initially closed her report into Prado's Burger King trading scheme with "no findings" and did not notify others in the compliance department of any red flags.
Upon its review, the SEC concluded that Prado's business activities generated multiple red flags that Wolf should have identified and reported, such as the fact that Prado and fellow customers comprised the top four positions in Burger King Securities, Prado's group made substantial profits within 10 days of the public announcement that exceeded the $5,000 threshold specified in look back review procedures that should have triggered such a review, and that Prado's group and the company acquiring Burger King were all Brazilian.
The SEC inquiry into Wolf's actions also revealed that at some point after the Commission opened its investigation of Prado, Wolf returned to her 2010 Prado report and attempted to provide an additional reason for closing the review, claiming that rumors in news articles released weeks before the announcement had predicted the acquisition.
Further research by the investigation team revealed that no such news articles were ever filed and that Wolf did indeed alter the original 2010 document years after she closed Prado's report with "no findings." The SEC additionally charged Wolf with providing inconsistent information, first denying that she had modified the 2010 document after the fact, and then when pressed at a later date, testifying that she had modified the 2010 document after creating it.
Daniel M. Hawke of SEC Enforcement's Market Abuse Unit confirmed the Commission's stance: "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."
The SEC specifically charged Wolf with willfully aiding and abetting and causing Wells Fargo Advisors to violate provisions of the Securities Exchange Act of 1934 and Investment Advisors Act of 1940.
If you have invested with Wells Fargo Advisors under the purview of compliance officer Judy K. Wolf, or with any firm, broker or advisor whose failure to protect your confidential information or conduct thorough reviews and/or due diligence in your best interests has proven harmful to your investments or financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.