Federal probe extends into Wells Fargo’s wealth business: Report
A federal investigation into Wells Fargo’s sales practices has extended into the bank’s wealth management business from the retail-banking unit where the problems started, according to The Wall Street Journal.
FBI agents have interviewed wealth management employees in Phoenix, the Journal reported.
This investigation comes a few months after the Justice Department spurred Wells Fargo to conduct its own internal investigation into its wealth management business after whistleblowers reported sales practice issues, according to another article from The Wall Street Journal earlier this month.
The whistleblowers claimed that the bank's wealth management business was pushing particular products or services "with an eye toward earning more compensation rather than finding the best fit for the customer," the journal reported.
The bank's wealth and investment management division has more than 14,500 financial advisors overseeing approximately $1.7 trillion in client assets, according to the company.
Wells Fargo declined to comment specifically on the report of a new investigation by the Justice Department and the SEC. But the bank said in an email that its “top priority is to rebuild trust with all of our stakeholders.” It also pointed to a statement in its latest 10-K filing that reflects its “continued commitment to transparency, even when all of the information or the final outcome of a matter may not be known just yet. We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company.”
The Justice Department declined to comment, saying that as a matter of policy, “it does not confirm, deny, or otherwise comment, on the existence or nonexistence of investigations.”
The SEC did not respond to a request for more information.
Ever since the bank reached a $185 million settlement with regulators in 2016, it has been besieged by formal and informal investigations by the SEC, the Department of Labor, state attorneys general and prosecutors' offices, as well as congressional committees. In addition, a number of lawsuits have been filed by non-governmental parties seeking damages related to the company's sales practices.
Most recently, the Federal Reserve took the unprecedented step of restricting Wells Fargo's growth until it improves its governance and controls. The Fed also ordered the bank to replace four board members by the end of the year.
Separately, Wells disclosed this week that it gave CEO Tim Sloan a 36% pay raise to $17.4 million for 2017, according to American Banker. Sloan did not receive a cash bonus for 2017, but rather just stock compensation and salary. The stock bonus is tied in part to the bank's ability to record a higher return on equity than its rivals, according to Bloomberg.
Sen. Elizabeth Warren (D-Mass.) criticized the news, citing an alleged auto-insurance scam that the bank was embroiled in, among other scandals. “I don’t think that sort of corporate management merits a raise for CEO Tim Sloan,” Warren said in a tweet.