Wells Fargo & Co.’s legal and regulatory struggles expanded to previously untarnished businesses Thursday as the company revealed new allegations of improper sales practices. The Federal Reserve vowed to keep unprecedented sanctions in place for a “significant period.”
The bank, still trying to steady itself from a bogus-account scandal that took down former Chief Executive Officer John Stumpf, said government agencies had inquired about improprieties in the wealth-management business related to 401(k) rollovers and other products. The lender is also responding to queries from government agencies into its foreign-exchange business, the company said in a regulatory filing.
Wells Fargo has yet to put behind it 18 months of scandal in its retail-banking business, where employees under pressure to meet aggressive sales goals may have opened millions of accounts in customers’ names without permission. The bank has said it’s facing at least three major probes, including one by the U.S. Department of Justice. Last month, the Fed put in place sanctions preventing the bank from getting any bigger until it fixes its problems.
“We will not lightly lift” that restriction, Fed Chairman Jerome Powell told lawmakers at a Senate Banking Committee hearing Thursday, responding to Senator Elizabeth Warren’s call for the agency to stand firm. Wells Fargo will probably be subject to the sanctions for a “significant period,” Powell said.
Shares of the company fell 1.6 percent to $57.49 at 2:30 p.m. in New York trading, extending this year’s decline to 5.4 percent.
‘Inappropriate Referrals’
The wealth-management review, which the board is conducting in response to inquiries by federal government agencies, “is assessing whether there have been inappropriate referrals or recommendations” given to 401(k) plan participants and customers seeking alternative investments, the bank said in the filing. Wells Fargo also said that the probe is examining referrals given to brokerage clients to use services provided by its investment and fiduciary-services business, which is a part of the wealth-management division run by Jonathan Weiss.
Shearman & Sterling LLP, the law firm that conducted the board’s investigation into sales abuses at the retail bank, is also spearheading the wealth-management review, a person familiar with the matter said.
CEO Tim Sloan said in a Feb. 12 interview with Bloomberg that the bank hadn’t uncovered issues similar to the consumer bank scandal in the wealth-management unit. “I’m not going to provide any absolute guarantee -- ever, ever -- that we’re ever not going to find an issue in any of our businesses,” Sloan said.
‘Incorrect Fees’
The company is conducting a separate review of “incorrect fees” charged to customers’ fiduciary and custody accounts, according to Thursday’s filing, which said outside consultants are trying to determine how it miscalculated the value of certain assets. Wells Fargo said the review is in its “preliminary stages” and centered around non-publicly traded assets.
The foreign-exchange review follows the bank’s disclosure late last year that four currency traders left the firm over a transaction conducted for a client. The bank said its “leadership took steps to hold accountable the individuals who were involved.”