The Securities and Exchange Commission today announced it has charged former Wells Fargo (NYSE:WFC) CEO John Stumpf and the bank's former head of community banking Carrie Tolstedt with misleading investors.
Stumpf has agreed to pay a $2.5 million for his actions and to refrain from such violations in the future, although he did not admit or deny wrongdoing. The regulatory agency is pursuing fraud charges against Tolstedt in court.
The SEC announced it had formally charged the executives, but noted the charges against Stumpf included those that had been previously settled. In anticipation of the proceedings against him, Stumpf offered to pay the $2.5 million fine, which the agency accepted.
The SEC said Stumpf, who was Wells Fargo's CEO from 2007 until his resignation in 2016, signed off on filings with the agency saying Wells Fargo and its Community Bank program sold products only to customers who needed them, which was a core business strategy for the bank.
In reality though, Wells Fargo had in place a sales-volume business model that incentivized salespeople to actively cross-sell products to customers regardless of whether they actually needed them.
The SEC's division of enforcement director Stephanie Avakian said, "If executives speak about a key performance metric to promote their business, they must do so fully and accurately."
In charging Tolstedt, the SEC alleges she signed misleading sub-certifications with the agency attesting to the accuracy of the filings, but she either knew or was "reckless in not knowing" the disclosures about the bank's cross-selling were materially false and misleading.
The SEC said it will take the $2.5 million Stumpf agreed to pay and combine it with the $500 million Wells Fargo has paid and return it to harmed investors.