SEC charges Wells Fargo's former CEO and top executive for misleading investors over success of its core business
- The Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf together with another top executive on Friday for intentionally misleading investors over the US bank's core business.
- Carrie Tolsted, former community bank chief, is said to have known that a key selling metric was inflated, but used it as a measure of success anyhow.
- Stumpf signed and certified documents with the SEC in 2015 and 2016 when he should have known they were misleading, the regulator said.
- The former CEO has agreed to pay a $2.5 million penalty, and the regulator will litigate fraud charges against Tolstedt in court.
The US SEC has charged former Wells Fargo CEO John Stumpf for misleading investors over the success of its core business, according to a Friday filing.
Former community bank head Carrie Tolsted has been hit with the same charge. From mid-2014 through mid-2016, Tolsted is said to have trumpeted the bank's key selling metric as a measure of success. The metric was actually fraudulent and inflated, based on accounts and services that were "unused, unneeded, or unauthorized," the SEC said.
Tolsted signed misleading documents about the bank "when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo's cross-sell metric were materially false and misleading," the regulator said.
Former CEO Stumpf signed and certified documents with the regulator in 2015 and 2016, while he should have been aware of their misleading nature, the SEC said.
"According to the order, Stumpf failed to assure the accuracy of his certifications after being put on notice that Wells Fargo was misleading the public about the cross-sell metric," the SEC said.
In response to the latest charge, Wells Fargo reiterated a previous statement that at the time of its sales practice issues, the bank didn't have "appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct."
Stumpf agreed to pay a $2.5 million penalty to settle the agency's charges, and the regulator will litigate fraud charges against Tolstedt in court.
"If executives speak about a key performance metric to promote their business, they must do so fully and accurately," Stephanie Avakian, director of the SEC's Division of Enforcement said in a statement. "The Commission will continue to hold responsible not only the senior executives who make false and misleading statements but also those who certify to the accuracy of misleading statements despite warnings to the contrary."