SEC joins list of agencies probing beleaguered Wells Fargo
Wells Fargo has confirmed the existence of an investigation by the Securities and Exchange Commission (SEC), into its sales practices, and the bank revealed that it has almost doubled funds set aside to deal with its ongoing legal problems.
The bank said in a regulatory filing on Thursday that the SEC has joined other federal state and local government agencies and states attorneys general, prosecutors' offices and Congressional committees, performing formal or informal inquiries, investigations or examinations.
The San Francisco bank has been under fire since it was discovered that employees, to meet extremely lofty sales goals, opened as many as two million bank and credit card accounts without customer authorisation. The company has since fired more than 5,000 employees, the vast majority of them lower-level workers.
Due to its mounting legal woes, Wells Fargo is also boosting litigation reserves from $1 billion to $1.7 billion.
"The ultimate resolution of any of these pending legal proceedings or government investigations, depending on the sanctions and remedy sought and granted, could materially adversely affect our results of operations and financial condition," the bank said in a filing with the SEC. "We may also incur additional costs and expenses in order to address and defend these pending legal proceedings and government investigations, and we may have increased compliance and other costs related to these matters."
Wells Fargo is enveloped in the biggest scandal in its 164-year history, which forced the abrupt retirement last month of its CEO, John Stumpf. Tim Sloan was named as its new CEO.
The bank faces several class-action lawsuits, as well as criminal investigations by the Department of Justice and the California Attorney General's Office.
Even in this bitterly divided election season, members of Congress have found bipartisan unity in their disdain for Wells Fargo and its business practices.
There are also signs that customers are leaving the bank, or at least paring back their business with Wells.
In its quarterly earnings report released in October, Wells reported double-digit percentage drops in bank account openings, as well as declines in bank branch traffic.
The bank acknowledged those risks Thursday in its filing.
"Negative publicity or public opinion resulting from these matters may increase the risk of reputational harm to our business, which can impact our ability to keep and attract customers, our ability to attract and retain qualified team members, result in the loss of revenue, or have other material adverse effects on our results of operations and financial condition."