Broker-Dealer Failure to Supervise Liability: Wells Fargo Advisors LLC Settles Burger King Insider Trading Charges with SEC for $5 Million
23rd September 2014
Wells Fargo Advisors LLC has agreed to pay a $5 million penalty to settle SEC charges that a former broker engaged in insider trading of Burger King stock before the company's 2010 buyout.
According to a criminal complaint filed in January, the Department of Justice alleged that Waldyr Da Silva Prado Neto, a former Brazilian financial adviser at Wells Fargo, learned of Burger King's pending sale to 3G Capital Management from a brokerage customer who invested in a 3G fund. Mr. Prado then allegedly bought Burger King stock and sold his holdings after the announcement of the deal on Sept. 2, 2010, according to prosecutors.
The SEC found that "multiple groups responsible for compliance or supervision within Wells Fargo received indications that the broker was misusing customer information." The SEC said "these groups lacked coordination or any assigned responsibilities, and they ultimately failed to act on these indications."