Wells Fargo Fined $275,000 by FINRA for Municipal Advisor Registration Failures

Wells Fargo Clearing Services, LLC has been censured and fined $275,000 by the Financial Industry Regulatory Authority (FINRA) for failing to maintain a supervisory system designed to prevent unregistered municipal advisory activity over a period of more than five years.

According to the settlement, from at least June 2019 to November 2024, Wells Fargo had hundreds of municipal entity customers who transacted in both municipal and non-municipal securities through firm accounts. Despite these relationships, the firm was not registered as a municipal advisor — a designation required under Section 15B(a)(1)(B) of the Securities Exchange Act of 1934 when providing certain types of advice to municipal entities.

Lack of Supervisory Procedures and Guidance

FINRA found that Wells Fargo’s written supervisory procedures (WSPs) prohibited its brokers from advising municipal entities on investing proceeds from municipal securities issuances. However, the firm failed to:

• Provide clear guidance on what constitutes prohibited “advice” to municipal entities.
• Define other activities that might trigger municipal advisor registration.
• Implement a process to identify whether municipal entity deposits were proceeds from municipal securities issuances.
• Put in place effective controls to prevent or detect improper advice-giving.

Instead, Wells Fargo relied on provisions buried in client account agreements and annual account statement disclosures to discourage the deposit of such proceeds — measures that FINRA deemed insufficient and “not prominent.”

Regulatory Rules Cited

The enforcement action found violations of:

• MSRB Rule G-27 – Supervisory system requirements for municipal securities activities.
• FINRA Rule 3110(a) and (b) – Supervisory system and WSP requirements.
• FINRA Rule 2010 – Standards of commercial honor and just and equitable principles of trade.

The failures amounted to an inability to reasonably ensure compliance with federal and municipal securities laws governing municipal advisor registration.

Broader Regulatory Context

Municipal advisor registration rules, implemented after the Dodd-Frank Act, are designed to protect municipal entities from receiving conflicted or unqualified investment advice regarding the proceeds of bond issuances and other municipal securities transactions. Firms engaging in such advisory activities without registration may face enforcement action from FINRA, the Municipal Securities Rulemaking Board (MSRB), or the Securities and Exchange Commission (SEC).

Sanctions

As part of the settlement, Wells Fargo agreed to:

• Censure – A formal disciplinary action.
• $275,000 Fine – Payable to FINRA.

The firm neither admitted nor denied the findings but consented to the sanctions to resolve the matter.

Implications for Broker-Dealers

The case serves as a reminder to broker-dealers — especially those with municipal clients — to review and strengthen their supervisory systems and WSPs to ensure compliance with municipal advisor registration requirements. Firms must also provide clear, practical guidance to associated persons on what constitutes municipal advisory activity and implement proactive controls to detect and prevent violations.

Full details of the settlement are available in FINRA’s published disciplinary action here.