Securities Exchange Commission (SEC) Share Class Selection Disclosure Initiative
Wells Fargo Clearing Services, LLC (WFCS), operating under the tradename of First Clearing, provides account statements, trade confirmations and other record-keeping, operational, clearing and custodial services for your brokerage firm.
WFCS is providing this notice for clients who currently maintain or previously held an account with a brokerage firm which invested in an advisory program where Wells Fargo Advisors1 (WFA) acted as the registered investment adviser.
In 2018, WFCS elected to participate in the Securities and Exchange Commission’s (SEC) Mutual Fund Share Class Selection Disclosure Initiative (“SCSD Initiative”). The SCSD Initiative provided the opportunity for firms to voluntarily self-report to the SEC’s Division of Enforcement possible securities law violations related to the adequacy of their disclosures concerning mutual fund share class selection and fees received pursuant to Rule 12b-1 under the Investment Company Act of 1940. As part of the SCSD Initiative, WFCS conducted a thorough review of disclosures and activities related to mutual fund share class selection within advisory programs where WFA acted as the registered investment adviser during the period of January 1, 2014 through July 31, 2015.
At the conclusion thereof, WFCS consented to a settlement agreement finding violations of Sections 206(2) and Section 207 of the Investment Advisers Act of 1940 and entry of an order under which WFCS was censured, agreed to cease and desist from committing further violations and agreed to pay disgorgement and prejudgment interest totaling $17,363,847.29. The SEC did not impose a fine or civil penalty based on WFCS’ self-reporting action.
In addition, under the settlement WFCS agreed to distribute the full amount of disgorgement plus pre-judgement interest to affected clients. These refunds will be distributed to eligible current and former advisory clients, with the exception of de minimis refunds, in September 2019. “De minimis” refers to accounts that no longer maintain a relationship with your firm where the amount of 12b-1 fees paid on such account plus interest on such account is less than $10.
To view the order in its entirety, visit https://www.sec.gov/litigation/admin/2019/ia-5199.pdf.
1 First Clearing and Wells Fargo Advisors are tradenames of Wells Fargo Clearing Services, LLC.