The U.S. Securities and Exchange Commission (SEC) announced settlements with Wells Fargo Clearing Services LLC and LPL Financial LLC for failing to provide complete and accurate securities trading information, known as “blue sheet” data. Both firms have agreed to pay $900,000 each to resolve the SEC’s charges related to these reporting failures.
Blue sheet data is critical to the SEC’s efforts to detect market misconduct and protect investors. The SEC uses this data to track securities transactions and the individuals or firms involved, enabling them to detect potential violations of securities laws.
According to the SEC’s findings, over a period of several years, both Wells Fargo and LPL submitted numerous blue sheet reports that contained inaccurate or missing details about securities transactions. Wells Fargo’s submission errors, stemming from approximately 15 different types of inaccuracies, impacted 11,195 blue sheet submissions covering more than 10.6 million transactions. LPL’s errors, involving 10 types of inaccuracies, affected at least 3,679 submissions, impacting about 399,000 transactions.
The SEC’s order against Wells Fargo found that the firm failed to report accurate data on a variety of critical aspects of securities transactions, while LPL’s errors similarly involved misreporting or omitting essential information about transactions. Both firms took steps to rectify the issue, including hiring external consultants to review and improve their blue sheet reporting systems. Additionally, both companies enhanced their governance frameworks and validation processes to ensure future compliance.
“We use blue sheet data to detect wrongdoing and to protect investors through our enforcement efforts,” said Thomas P. Smith Jr., Associate Regional Director of the SEC’s New York Regional Office. “These orders underscore the importance of the obligation to provide accurate and complete blue sheet data to the SEC. Additionally, these resolutions highlight the benefits of self-reporting, remediation, and cooperation when firms detect violations.”
Both Wells Fargo and LPL Financial admitted to the findings in the SEC orders, which cited violations of the broker-dealer recordkeeping and reporting provisions of federal securities laws. The firms were each censured and agreed to pay a $900,000 civil penalty to resolve the charges.
In addition to the SEC settlements, the Financial Industry Regulatory Authority (FINRA) also reached settlements with the two firms for related conduct.
