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Wells Fargo (WFC) to Pay $1B for Shareholders' Class-Action Suit
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Wells Fargo & Company (WFC - Free Report) agreed to pay $1 billion related to a lawsuit accusing the bank of overstating its progress on resolving its 2016 fake account scandal, and thereby defrauding shareholders.
Since 2018, WFC has been under consent orders from the Federal Reserve and two other financial regulators to improve its governance and oversight.
But the bank’s shareholders alleged that Wells Fargo and its past management misinformed them about how swiftly the company was addressing the governance issues and risk-management systems due to which the bank opened millions of fake accounts. Accordingly, when these shortcomings surfaced, the bank's market value fell by more than $54 billion over two years ending in March 2020.
However, Wells Fargo denied any wrongdoing and decided to settle to eliminate further litigation expenses.
Markedly, troubles mounted at Wells Fargo in September 2016, following the revelation of the opening of millions of unauthorized accounts, along with issues in its auto-insurance business, online bill pay services, and the Wealth and Investment Management segment. Since then, the bank has been slapped with numerous penalties and sanctions, including a cap on the asset position by the Federal Reserve.
The 2015 consent order regarding add-on products that the company sold to retail banking customers was terminated in January 2022 and the 2016 consent order related to retail sales practices was allowed to expire. However, in September 2021, the bank was levied with restrictions on acquiring certain residential mortgage servicing and a $250-million penalty due to its inefficient home-lending loss mitigation program. In February 2020, the bank entered a $3-billion settlement with the authorities investigating its Community Bank sales practices. Nevertheless, Wells Fargo still has a long list of pending legal cases and remains under close supervision of the regulatory authorities.
Over the past six months, shares of WFC have declined 15.7% compared with the industry’s fall of 15.5%.
Recently, the U.S. Commodity Futures Trading Commission (“CFTC”) charged HSBC Holdings plc (HSBC - Free Report) for manipulative and deceptive trading, and record-keeping failures. Units of HSBC agreed to pay $75 million to settle the charges.
Per the CFTC’s claim, between March 2012 and April 2016, HSBC traders engaged in manipulative and deceptive trading in interest rate swaps and other financial products.
HSBC has already been penalized by the Securities and Exchange Commission (“SEC”) for related charges.
Last week, the SEC slapped units of The Bank of Nova Scotia (BNS - Free Report) and HSBC with civil penalties for widespread record-keeping violations through employees’ use of personal devices and apps for work communications.
BNS and HSBC agreed that they had failed to meet record-keeping requirements for dealers registered with the U.S. market regulators.
Hence, HSBC agreed to pay $15 million to settle the charges, whereas BNS agreed to pay $22.5 million.
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Wells Fargo (WFC) to Pay $1B for Shareholders' Class-Action Suit
Wells Fargo & Company (WFC - Free Report) agreed to pay $1 billion related to a lawsuit accusing the bank of overstating its progress on resolving its 2016 fake account scandal, and thereby defrauding shareholders.
Since 2018, WFC has been under consent orders from the Federal Reserve and two other financial regulators to improve its governance and oversight.
But the bank’s shareholders alleged that Wells Fargo and its past management misinformed them about how swiftly the company was addressing the governance issues and risk-management systems due to which the bank opened millions of fake accounts. Accordingly, when these shortcomings surfaced, the bank's market value fell by more than $54 billion over two years ending in March 2020.
However, Wells Fargo denied any wrongdoing and decided to settle to eliminate further litigation expenses.
Markedly, troubles mounted at Wells Fargo in September 2016, following the revelation of the opening of millions of unauthorized accounts, along with issues in its auto-insurance business, online bill pay services, and the Wealth and Investment Management segment. Since then, the bank has been slapped with numerous penalties and sanctions, including a cap on the asset position by the Federal Reserve.
The 2015 consent order regarding add-on products that the company sold to retail banking customers was terminated in January 2022 and the 2016 consent order related to retail sales practices was allowed to expire. However, in September 2021, the bank was levied with restrictions on acquiring certain residential mortgage servicing and a $250-million penalty due to its inefficient home-lending loss mitigation program. In February 2020, the bank entered a $3-billion settlement with the authorities investigating its Community Bank sales practices. Nevertheless, Wells Fargo still has a long list of pending legal cases and remains under close supervision of the regulatory authorities.
Over the past six months, shares of WFC have declined 15.7% compared with the industry’s fall of 15.5%.
Image Source: Zacks Investment Research
Currently, WFC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Misconduct by Other Firms
Recently, the U.S. Commodity Futures Trading Commission (“CFTC”) charged HSBC Holdings plc (HSBC - Free Report) for manipulative and deceptive trading, and record-keeping failures. Units of HSBC agreed to pay $75 million to settle the charges.
Per the CFTC’s claim, between March 2012 and April 2016, HSBC traders engaged in manipulative and deceptive trading in interest rate swaps and other financial products.
HSBC has already been penalized by the Securities and Exchange Commission (“SEC”) for related charges.
Last week, the SEC slapped units of The Bank of Nova Scotia (BNS - Free Report) and HSBC with civil penalties for widespread record-keeping violations through employees’ use of personal devices and apps for work communications.
BNS and HSBC agreed that they had failed to meet record-keeping requirements for dealers registered with the U.S. market regulators.
Hence, HSBC agreed to pay $15 million to settle the charges, whereas BNS agreed to pay $22.5 million.