Wachovia Securities Agrees to $1.4 Million FINRA Fine for Failure to Deliver Prospectuses to Customers

FINRA 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.

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:

• Collateral mortgage obligations • Exchange-traded funds • Preferred stocks • Secondary purchases of equity non-syndicate initial public offerings • Corporate debt securities • Mutual funds • Equity syndicate initial public offerings • Alternative investment securities • Auction market preferred securities
According 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.”

Per FINRA, reasons Wachovia Securities did not give prospective customers the required prospectuses included:

• Business units’ failure to report to the proper department that prospectus delivery was required • Coding errors • Failure to supervise and monitor outside vendors under contract to deliver prospectuses • Inadequate supervisory systems, procedures, and polices
When 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..

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.

Related Web Resources:
FINRA Fines Wachovia Securities $1.4 Million for Prospectus Delivery Failures, Related Supervisory Violations, FINRA, June 25, 2009
Wachovia Fined $1.4 Million By Finra For Not Sending Prospectuses, June 30, 2009
Our securities fraud law firm knows how frustrating it can be to suffer investment losses because of broker-dealer misconduct or negligence. Contact one of our experienced stockbroker fraud lawyers today.