On October 15, 2014, the SEC announced an enforcement action against Judy K. Wolf, a former compliance officer at Wells Fargo Advisors, LLC (“Wells Fargo”), a dually registered broker-dealer and investment adviser, for allegedly altering a document that was produced to the SEC staff (the “Staff”) during an investigation seeking to determine whether a Wells Fargo registered representative engaged in insider trading and whether Wells Fargo had adequate insider trading policies in place. According to the order, Wolf’s duties included identifying potentially suspicious trading activity by Wells Fargo personnel or the firm’s customers or clients and analyzing whether trades may have been based on material, non-public information (a “look back review”).
The order alleges that, in connection with a 2012 SEC investigation regarding possible insider trading by a Wells Fargo registered representative, Wells Fargo produced an altered document to the Staff without any mention that it had been altered. Wolf had originally created the document in connection with a look back review in September 2010 regarding trades in Burger King securities by the Wells Fargo employee and his customers. In the document, Wolf summarized her review of such trading activities and closed her review with “no findings” (the “Report”). The SEC asserts that, in December 2012, more than two years after Wolf concluded her review, and following the SEC charging the Wells Fargo employee with trading the Burger King securities on the basis of material, non-public information, Wolf altered the Report to make it appear as though she had performed a more thorough review of the relevant trades in September 2010. During her initial testimony to the SEC in March 2013, Wolf denied altering the Report after September 2010. Subsequent to Wolf’s March 2013 testimony, metadata analysis confirmed that Wolf had in fact altered the Report prior to its production to the Staff. Wells Fargo thereafter placed Wolf on administrative leave and terminated Wolf’s employment with the firm in June 2013. After the termination of her employment, Wolf testified to the SEC again in June 2013 and admitted to altering the Report prior to producing it to the Staff.
The SEC asserts that, by producing the altered Report to the Staff without any mention that it had been altered, Wells Fargo violated the books and records requirements applicable to broker-dealers and investment advisors.1 By altering the Report, the SEC also contends that Wolf willfully aided and abetted and caused Wells Fargo to violate Section 17(a) of the Securities Exchange Act of 1934, as amended, and Rule 17a-4(j) thereunder, and Section 204(a) of the Investment Advisers Act of 1940, as amended.