Wells Fargo & Company (NYSE:WFC) has reached an agreement to resolve charges brought by the Securities and Exchange Commission (SEC) by agreeing to pay a civil penalty of $35 million. The charges stem from allegations that the company had overcharged advisory fees totaling more than $26.8 million across more than 10,900 investment advisory accounts.
Certain financial advisers at WFC and its predecessor firms chose to lower the standard advisory fees for specific clients. These adjustments were manually noted on the investment advisory agreements, indicating the revised fees. However, the employees responsible for account processing failed to update the reduced advisory fee rates within the company’s billing systems.
Furthermore, WFC neglected to establish and execute written compliance protocols for maintaining accurate and comprehensive billing systems, a step intended to prevent the inadvertent overcharging of clients. As a result, WFC and its predecessor entities continued to overcharge particular clients for advisory fees, encompassing accounts opened before 2014 through the conclusion of December 2022.
In an effort to rectify the overcharges and address the appropriate interest, Wells Fargo disbursed around $40 million to affected account holders who had been overcharged. The company also chose to resolve the matter without admitting or denying the claims made against it.
In addition to these challenges, Wells Fargo faces an extensive list of ongoing legal matters and is grappling with operational obstacles, all while operating under the watchful eye of regulatory bodies. The bank has incurred multiple penalties and sanctions, including an asset position cap imposed by the Federal Reserve.
In a separate development in May 2023, Wells Fargo consented to a $1 billion settlement tied to a lawsuit that alleged the bank had misrepresented its efforts to resolve a fake account scandal from 2016, thereby deceiving shareholders. These situations are anticipated to elevate the company’s expenditures in the near future, potentially constraining its overall bottom-line growth.
Over the past six months, shares of Wells Fargo have experienced a decline of 11.8%, outperforming the industry’s broader decrease of 13.2%.
Featured Image: Unsplash @ joão vincient lewis
