FINRA has fined Wells Fargo Advisors of St. Louis, MO, $1 million for violations regarding mutual fund prospectuses and CRD records of its brokers.  

        Delays in Delivering Prospectuses.   Specifically, the brokerage firm was sited for its failure to deliver prospectuses within 3 business days of transactions as required by federal securities laws to more than 900,000 customers who purchased mutual funds in 2009, and for delays in reporting material information about its current and former representatives, including arbitrations and complaints involving its representatives.

Wells Fargo had contracted with a third party to mail the prospectuses, but many customers received their prospectuses from one to 153 days late.  The service provider alerted Wells Fargo to the delays on both a daily and quarterly basis.

• Quarterly reports were sent to Wells Fargo showing that between 4% and 9% of the firm's mutual fund customers failed to receive the required prospectuses on time. 
• Daily reports alerted Wells Fargo that a number of prospectuses still required delivery.

Yet, when informed about the delivery problems, Wells Fargo still failed to take the appropriate corrective measures.  

        Delays in Updating CRD Records.   FINRA also found that Wells Fargo did not promptly report required information regarding its current or former representatives.  Under FINRA rules, a securities firm must ensure that information on Forms U4 for its registered reps is kept current in FINRA's Central Registration Depository.  A firm must also ensure that it updates a representative's Form U5 after the representative leaves the firm.  These forms must be updated within 30 days of the firm learning that a significant event has occurred - including notification of a formal investigation, customer complaints or arbitrations filed against the representative.

FINRA found that from 7/1/08 to 6/30/09, Wells Fargo failed to update on a timely basis 8.1% of their Forms U4 and 7.6% of their Forms U5.  In total, Wells Fargo filed nearly 190 late amendments to Forms U4 and U5.

In settling this matter, Wells Fargo neither admitted nor denied the charges, but consented to the entry of FINRA's findings.   [FINRA Release, 5/5/11]