Welcome to Financial Advisor IQ

Wells Fargo is Discussing "Resolutions" with the DOJ and SEC

February 28, 2019

Wells Fargo has started preliminary settlement talks with the U.S. Department of Justice and the SEC, which have been investigating sales practices in the company’s wealth management units, according to news reports.

The company announced the talks in its annual regulatory filing, which was first reported by Reuters. The discussions are related to previously disclosed investigations of its sales practices, according to the newswire. But they appear only to include the company’s retail sales practices — specifically “certain retail sales practices of the Company that were the subject of settlements with the [Consumer Financial Protection Bureau], the [Office of the Comptroller of the Currency], and the Office of the Los Angeles City Attorney announced by the Company on September 8, 2016,” the company says in the filing that was submitted Wednesday.

The $185 million settlement was related to the revelations that thousands of the company’s banking employees opened millions of bogus accounts.

“The Company has also engaged in preliminary and/or exploratory resolution discussions with the Department of Justice and the SEC, although there can be no assurance as to the outcome of these discussions,” Wells Fargo says in the filing under a section called “Retail Sales Practices Matters.”

But the DOJ and the SEC have also been investigating the sales practices at Wells Fargo’s wealth management division specifically, since at least March, the Wall Street Journal wrote at the time citing people familiar with the matter.

Wells Fargo’s preliminary talks do not appear to cover the wealth management unit, although the company acknowledges that at least some parts of the business may have overcharged clients.

“Federal government agencies are conducting formal or informal inquiries, investigations, or examinations regarding fee calculations within certain fiduciary and custody accounts in the Company’s investment and fiduciary services business, which is part of the wealth management business within [Wealth and Investment Management],” Wells Fargo says in the filing. “The Company has determined that there have been instances of incorrect fees being applied to certain assets and accounts, resulting in both overcharges and undercharges to customers.”

What’s more, Wells Fargo appears to be optimistic about its own investigation of sales practices in the wealth management business, which was prompted by the DOJ and the SEC in late 2017. However, the company acknowledges that regulators are still investigating those practices.


“A review of certain activities within Wealth and Investment Management (WIM) being conducted by the Board, in response to inquiries from federal government agencies, is assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the Company’s investment and fiduciary services business,” the company says in the filing. “The Board’s review is substantially completed and has not, to date, uncovered evidence of systemic or widespread issues in these businesses. Federal government agencies continue to review this matter.”

By Alex Padalka
  • To read the Reuters article cited in this story, click here.