Business

Wells Fargo faces SEC probe into unauthorized accounts

by Sylvan Lane and Peter Schroeder - 11/03/16 2:16 PM ET

The Securities and Exchange Commission (SEC) is investigating Wells Fargo over questions about the bank’s disclosures to investors.

{mosads}Wells Fargo revealed the SEC probe in a Thursday quarterly filing to regulators. The Department of Justice and the state of California are also investigating the San Francisco-based bank after it settled charges of opening nearly 2 million unauthorized accounts.

Wells Fargo “has responded, and continues to respond, to requests from a number of the foregoing seeking information regarding these sales practices and the circumstances of the settlements and related matters,” the bank wrote.

The SEC inquiry would likely focus on whether Wells Fargo should have revealed the investigation to investors before its Sept. 8 settlement with the Consumer Financial Protection Bureau (CFPB) and other regulators.

The $185 million fine came almost three years after the Los Angeles Times first reported on Wells Fargo’s actions December 2013.

Democratic senators have called for the SEC to investigate the bank, and lawmakers from both parties suggested former CEO John Stumpf and other executives should face criminal charges.

Massachusetts, California and Ohio cut off state business with Wells Fargo, and the Better Business Bureau revoked its approval of the bank.

Wells Fargo has tried to rehabilitate its image with a national ad campaign in which the company promises to reimburse customers who paid fees on unauthorized accounts, adjust its sales practices and impose new measures to verify account openings.

Meanwhile, a trio of Democratic senators — Elizabeth Warren (Mass.), Ron Wyden (Ore.) and Bob Menendez (N.J.) — are questioning whether Wells Fargo should have found something amiss sooner.

Specifically, the lawmakers said in a letter sent to the bank Thursday that it appeared the bank had filed reports with a regulator detailing over 200 employees fired for illegal behavior between 2011 and 2015. The senators argued those documents, sent to the Financial Industry Regulatory Authority, should have tipped off bank executives to problems before the government stepped in with its probe.

Furthermore, the lawmakers questioned whether some fired employees faced “defamatory statements” from the bank if they criticized its aggressive sales tactics.

The lawmakers are demanding answers on how the bank crafted those documents, and whether they accurately detailed why an employee left the bank.

Updated at 2:28 pm.

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Tags Bob Menendez Elizabeth Warren Ron Wyden