Wells Fargo & Co’s Woes Deepen as SEC Starts Probe
It seems that problems for Wells Fargo & Co (NYSE:WFC) are far from over. After being punished by investors and regulators for opening millions of unauthorized bank accounts, the bank is now being deprived of business by different states in the U.S.
The latest addition to this list is Pennsylvania, which suspended the bank from investment or trading activities with its treasury department for one year.
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Treasurer Timothy Reese said that he would evaluate the San Francisco-based bank’s status should it show progress in changing its practices.
“The bank’s actions call into question its internal controls and culture, and until the bank fixes those problems, they will not be eligible for investment or trading work with Treasury,” said Reese in a statement. (Source: “Pennsylvania Becomes Latest State To Penalize Wells Fargo,” Bloomberg, November 3, 2016.)
This Pennsylvanian action comes after California, Illinois, Ohio, and Massachusetts, all slammed their doors on Wells Fargo & Co after it disclosed to authorities in September that its employees opened accounts without the approval of its clients.
The practice was so widespread that it involved 5,300 employees, who secretly created millions of unauthorized bank and credit card accounts without their customers’ knowledge since 2011. The bank agreed to pay $185.0 million in fines to resolve the claims.
In a separate development, Wells Fargo confirmed that the U.S. Securities and Exchange Commission (SEC) has joined the growing number of state and federal agencies investigating the company’s sham-accounts scandal.
The SEC, along with the U.S. Department of Justice, the offices of state attorneys general, congressional committees, and others have “undertaken formal or informal inquiries, investigations or examinations arising out of certain sales practices of the company,” Wells Fargo said in a regulatory filing. (Source: “Wells Fargo says SEC is also investigating its accounts scandal,” LA Times, November 3, 2016.)
Since the scandal broke out, Wells Fargo shares have fallen about 11% as investors shun one of the best-managed financial institutions in the U.S. on the fears that it will take a lot of time for the management to satisfy regulators and Wells Fargo customers.
The scandal forced Wells Fargo CEO John Stumpf to resign as the bank raced to restore investors’ confidence by announcing new measures to stop its cross-selling practices that forced workers to undertake unauthorized transactions as they struggled to meet sales targets.
