November 19, 2020
The Financial Industry Regulatory Authority (FINRA) Department of Enforcement recently approved a Letter of Acceptance, Waiver and Consent (AWC) submitted by First Clearing LLC (n/k/a Wells Fargo Clearing Services, LLC), a brokerage firm that was a FINRA member from May 1986 to November 2016, to resolve violations of securities industry rules.
According to the AWC, First Clearing distributed 6,851 account statements that did not comply with NASD Rule 2340(c) between April 2016 and October 2016. During this time, the firm provided clearing services for 75 firms and approximately 8.2 million customer accounts.
Specifically, the firm sent statements to over 2,300 customers containing noncompliant valuation information for one or more Direct Participation Programs (DPPs) or Real Estate Investment Trusts (REITs) that did not comply with the NASD rule. FINRA also asserts that First Clearing failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to ensure that its customer account statements “reflected DPP and REIT prices derived from a valuation methodology allowed by NASD Rule 2340(c).” This misconduct also prevented the firm from maintaining accurate books and records relating to quarterly statements for customer accounts that contained DPPs and REITs. Based on the foregoing, First Clearing violated FINRA Rules 4511 and 2010 as well as NASD Rule 2340(c).
By signing the AWC, First Clearing consented to a censure and a $300,000 fine.