You’re bound to make a mistake. Don’t make the mistake even worse by faking a document you submit to the Securities and Exchange Commission in order to cover your original mistake.
Back in 2012, the SEC brought charges against Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami. He was accused of illegally trading in the stock of Burger King after he learned of an impending private equity transaction.
Wells Fargo admitted to compliance weaknesses and paid a $5 million fine in connection with that supervision failure. In connection with that failure’s administrative order, the SEC expressed its displeasure with a delay in production of the documents and the state of the documents.
When the documents were produced, the firm failed to produce an accurate record of the review as it existed at the time of the staff’s request. Instead, the firm produced a document that had been altered by an employee after the Commission staff issued its follow up request. When questions arose surrounding the altered document, Wells Fargo Advisors placed the employee on administrative leave and eventually terminated this employee.
- Prado and his customers represented the top four positions in Burger King securities firm-wide;
- Prado and his customers bought Burger King securities within 10 days before the acquisition announcement, including on the same days;
- The profits by Prado and his customers each exceeded the $5,000 threshold specified in the look back review procedures;
What did her in was an additional note in the log:
“09/02/10 opened 24% higher@ $23.35 vs. previous close of $18.86. Rumors of acquisition by a
private equity group had been circulating for several weeks prior to the announcement. The
stock price was up 15% on 9/1/12, the day prior to the announcement.” (My emphasis)
Wolf made a typo on the announcement date. According to the order, she argued that it was merely a contemporaneous type, but admitted in later testimony that she had made that additional log note after the SEC investigation. Wells Fargo was able to produce earlier copies of the log that did not have those two sentences.
Wolf tried covering her mistake, but it blew up into a bigger problem. Wells Fargo fired her and the SEC brought charges against her personally.
Sources:
- SEC Announces Enforcement Action Against Former Wells Fargo Advisors Compliance Officer for Altering Document
- SEC order against Judy K. Wolf
- No Language Barrier to Prosecuting Insider Trading
- Wells Fargo Advisors Admits Failing to Maintain Controls and Producing Altered Document, Agrees to Pay $5 Million Penalty