\t\t\t\tFINRA is fining Wachovia Securities, LLC $1.4 million for its alleged failure to provide customers with product descriptions and prospectuses between July 2003 and December 2004, as well as for related supervisory failures. A probe conducted by the SRO determined that the broker-dealer did not provide the prospectuses to clients in 6,000 of about 22,000 transactions during this time period. These 6,000 transactions’ market value was about $256 million.<\/p>\n
Per FINRA rules and by law, broker-dealers are required to give potential clients hard copy prospectuses. The SRO, however, discovered a number of deficiencies related to prospectus delivery by Wachovia Securities related to:<\/p>\n
\u2022\tCollateral mortgage obligations \u2022\tExchange-traded funds \u2022\tPreferred stocks \u2022\tSecondary purchases of equity non-syndicate initial public offerings \u2022\tCorporate debt securities \u2022\tMutual funds \u2022\tEquity syndicate initial public offerings \u2022\tAlternative investment securities \u2022\tAuction market preferred securities
\nAccording to FINRA Enforcement Chief and Executive Vice President Susan L. Merrill, failure to provide the investing public with prospectuses and other offering documents deprives customers of valuable data that they need to make “informed investment decisions.” <\/p>\n
Per FINRA, reasons Wachovia Securities did not give prospective customers the required prospectuses included:<\/p>\n
\u2022\tBusiness units’ failure to report to the proper department that prospectus delivery was required \u2022\tCoding errors \u2022\tFailure to supervise and monitor outside vendors under contract to deliver prospectuses \u2022\tInadequate supervisory systems, procedures, and polices
\nWhen the activity allegedly at issue occurred, Wachovia Securities, LLC was a non-bank affiliate and subsidiary of Wachovia Corporation. This year, the latter merged with Wells Fargo & Co.. <\/p>\n
By agreeing to settle, Wachovia Securities is not admitting to or denying the allegations. The broker-dealer, however, has agreed to an entry of the SRO’s findings. <\/p>\n