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Wells Fargo (WFC) to Pay $35M Penalty to SEC & Settle Charges
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Wells Fargo & Company (WFC - Free Report) has agreed to pay a civil penalty of $35 million to settle the Securities and Exchange Commission’s charges. The charges were levied on the company for overcharging advisory fees of more than $26.8 million in over 10,900 investment advisory accounts.
Some of WFC and its predecessor firms’ financial advisers consented to reduce the standard advisory fees for certain clients. These changes were handwritten or typed on the clients’ investment advisory agreements, thus reflecting the reduced fees. However, the employees in the account processing unit failed to enter the reduced advisory fee rates in the company’s billing systems.
Additionally, WFC failed to adopt and implement written compliance with policies and procedures regarding the accuracy and completeness of its billing systems to prevent overbilling of its clients. Hence, WFC and its predecessor firms have been overcharging certain clients for advisory fees who have opened their accounts prior to 2014 through the end of December 2022.
To reimburse the overcharging and provide for the appropriate interest charges, Wells Fargo paid approximately $40 million to the distressed accountholders. Further, it has agreed to resolve the issue without accepting or denying the claims on it.
Apart from these troubles, Wells Fargo has a long list of pending legal cases and has been facing operational challenges, while remaining under close supervision of the regulatory authorities. It has been slapped with numerous penalties and sanctions including a cap on the asset position by the Federal Reserve.
In May 2023, it 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. These are likely to increase expenses in the upcoming period, limiting the company’s bottom-line growth.
Wells Fargo’s shares have lost 11.8% over the past six months compared with the industry’s decline of 13.2%.
Nomura Holdings, Inc. (NMR - Free Report) has agreed to pay $35 million as part of a non-prosecution agreement with the federal government over criminal fraud relating to the trading of residential mortgage-backed securities.
The traders at NMR had been accused of overstating prices of MBS, which was demanded by sellers from 2009 to 2013, and keeping the difference.
UBS Group AG (UBS - Free Report) has arrived at a settlement with the U.S. Department of Justice to pay $1.44 billion as penalty to resolve a long-running civil case. The civil action against UBS was filed in 2018, alleging misconduct with regard to underwriting, issuance and sale of residential mortgage-backed securities that were issued in 2006-2007.
UBS said that the entire settlement has been provisioned in prior periods.
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Wells Fargo (WFC) to Pay $35M Penalty to SEC & Settle Charges
Wells Fargo & Company (WFC - Free Report) has agreed to pay a civil penalty of $35 million to settle the Securities and Exchange Commission’s charges. The charges were levied on the company for overcharging advisory fees of more than $26.8 million in over 10,900 investment advisory accounts.
Some of WFC and its predecessor firms’ financial advisers consented to reduce the standard advisory fees for certain clients. These changes were handwritten or typed on the clients’ investment advisory agreements, thus reflecting the reduced fees. However, the employees in the account processing unit failed to enter the reduced advisory fee rates in the company’s billing systems.
Additionally, WFC failed to adopt and implement written compliance with policies and procedures regarding the accuracy and completeness of its billing systems to prevent overbilling of its clients. Hence, WFC and its predecessor firms have been overcharging certain clients for advisory fees who have opened their accounts prior to 2014 through the end of December 2022.
To reimburse the overcharging and provide for the appropriate interest charges, Wells Fargo paid approximately $40 million to the distressed accountholders. Further, it has agreed to resolve the issue without accepting or denying the claims on it.
Apart from these troubles, Wells Fargo has a long list of pending legal cases and has been facing operational challenges, while remaining under close supervision of the regulatory authorities. It has been slapped with numerous penalties and sanctions including a cap on the asset position by the Federal Reserve.
In May 2023, it 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. These are likely to increase expenses in the upcoming period, limiting the company’s bottom-line growth.
Wells Fargo’s shares have lost 11.8% over the past six months compared with the industry’s decline of 13.2%.
Image Source: Zacks Investment Research
WFC presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Financial Misconduct by Other Firms
Nomura Holdings, Inc. (NMR - Free Report) has agreed to pay $35 million as part of a non-prosecution agreement with the federal government over criminal fraud relating to the trading of residential mortgage-backed securities.
The traders at NMR had been accused of overstating prices of MBS, which was demanded by sellers from 2009 to 2013, and keeping the difference.
UBS Group AG (UBS - Free Report) has arrived at a settlement with the U.S. Department of Justice to pay $1.44 billion as penalty to resolve a long-running civil case. The civil action against UBS was filed in 2018, alleging misconduct with regard to underwriting, issuance and sale of residential mortgage-backed securities that were issued in 2006-2007.
UBS said that the entire settlement has been provisioned in prior periods.