FINRA Issues Multi-Million Dollar Fine After Consumer Recordkeeping Violations

On December 7, 2021, the Financial Industry Regulatory Authority (FINRA) fined Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network $2.25 million for violating the requirement to store customer information in the “tamper-proof” "WORM" format for a period of over 13 years.

“WORM” format is commonly known as “write once, read many” data storage because the data issuer can write the data to a storage device or media file only once. After that, the data cannot be legitimately changed in any way. Pursuant to federal anti-money laundering regulations, this storage format is mandatory for all customer information stored by “broker-dealers” under FINRA.”

Wells Fargo employees discovered their violation of this requirement while conducting file reviews in 2016 pursuant to a separate censure being issued by FINRA. However, Wells Fargo reportedly elected not to report its discovered violation to FINRA until April 2020. As a result, between November 2016 and August 2020, more than 4 million records were improperly stored and Wells Fargo was issued a violation of Exchange Act Rule 17a-4(f)(2)(ii)(A), NASD Rules 3110 and 2110, and FINRA Rules 4511 and 2010.

For questions or concerns about how this enforcement action could apply to your organization, please contact Kennedy Sutherland.