Wells Fargo, American multinational banking and financial services holding company faces charges for allegedly making stock market trades using confidential customer information.
The firm was also accused of not reporting the event to the public for six months, as reported by the Securities and Exchange Commission.
This is the first time for the SEC filing a lawsuit to a brokerage company for not protecting the security of customer information.
The fourth largest bank in the U.S. received a $5 million fine on Monday for not being able to oversee and regulate insider trading and produce an accurate record of its internal reviews of the stock broker's transactions.
Wells Fargo did not negate the allegation and admitted their shortcomings to the SEC.
The stock broker in question is former broker Waldyr De Seliva Prado Neto. He is currently facing criminal charges for using private customer information in trading of Burger King stocks.
He was reportedly informed by a client back in 2010 that Burger King was acquired by private-equity firm 3G Capital Partners.
Prado then allegedly sold Burger King Stocks illegally to Brazilian investors for a profit of $175,000.
The SEC was able to retrieve the emails Prado sent to the Brazilian investors informing them of the deal.
Prado reportedly sent an email to banker Igor Cornelsen, who replied to Prado inquiring about the follow through of the "sandwich deal."
Cornelsen gained $1.68 million from the illegal transactions.
Both Prado and Cornelsen face criminal charges filed by federal prosecutors in Manhattan in relation to securities fraud and conspiracy and subsequently 20 years imprisonment for each count of fraud.
The SEC discovered that people in Wells Fargo were well aware of the illegal trades but did not do anything about it.
Wells Fargo reportedly waited six months before disclosing documents related to the case of Prado, without an explanation as to why the information was kept 'hidden' in that time period.
Meanwhile, Wells Fargo has been in troubled waters before related to trading transactions.
Back in 2012, the SEC charged former Wells Fargo Securities banker John Femenia with illegal transactions on impending mergers, from which he earned more than $11 million.
