The Securities and Exchange Commission has opened an investigation into Wells Fargo in the wake of the bank’s account falsification scandal.
The company disclosed to investors on Thursday that the stock market regulator is among the bodies inquiring into its sales practices, according to CNBC. The revelation came roughly 12 hours after The Wall Street Journal broke news of the development.
SEC officials have asked the bank for documentation and the agency’s fact-finding is still at an “early stage,” WSJ reported.
In September, it was announced that Wells Fargo had entered into $185 million in settlements with two federal regulatory bodies and prosecutors from the City of Los Angeles. The bank had admitted that more than 2 million accounts had been opened in their customers’ names without their consent between 2011 and 2015.
Penalties included a $100 million fine from the Consumer Financial Protection Bureau, which said the falsified accounts were linked to Wells Fargo “cross-selling” sales practices.
The term refers to a system of bonuses that had Wells managers pushing retail employees to sign customers up for new accounts. Tellers had complained of retribution from their bosses if they failed to meet company goals.
Liberal and progressive lawmakers have been aggressive in encouraging federal law enforcement officials to determine the extent to which the bank’s top executives committed fraud.
Democrats on the Senate Banking Committee–Elizabeth Warren (D-Mass.), Bob Menenedez (D-N.J.) and Jeff Merkley (D-Ore.)–asked the SEC in late September to look into whether Wells Fargo committed a crime.
The three lawmakers sent Commission Chair Mary Jo White a letter, pushing her to launch an inquiry into Wells’ compliance with whistleblower protection and securities disclosure laws, and statutes on internal controls that were enacted by President George W. Bush, after the Enron accounting scandal.
In Congressional testimony, then-Wells Fargo CEO John Stumpf had argued that the bank weeded out workers who opened dirty accounts. Stumpf noted that the consent order with the CFPB recognized the bank fired 5,300 employees for relevant misdeeds between 2011 and 2015.
After testimony on Capitol Hill by Stumpf, bank executives, nonetheless, announced that they would stop asking retail employees to meet cross-selling targets.
Stumpf also resigned appearing before committees on both the House and Senate side.
The SEC investigation comes amid general pressure on the agency, during a presidential campaign marked, at times, by stridently populist tones—despite the elite status of both parties’ candidates.
In recent weeks, with less than a month to go before the election, Sen. Warren asked President Obama to dismiss White from her position as SEC Chair, citing lax enforcement of securities laws.
The Justice Department had announced it would be looking into Wells’ sales practices less than a week after news of the $185 million settlement broke, on Sept. 8.
Like their Senate colleagues, Democratic legislators in the House have also been questioning if Wells Fargo violated securities laws, by failing to disclose systemic problems it was having with its workforce over the course of a half-decade.
During Stumpf’s September appearance before the House Financial Services Committee, Rep. Carolyn Maloney (D-N.Y.) asked the banker why he personally sold $13 million in Wells stock in 2013–around the same time he claimed to have first heard of systemic account falsifications.
Rep. Brad Sherman (D-Calif.), meanwhile, told Stumpf that Wells Fargo stock prices would have plummeted, had its cross-selling problems been more widely-known.
“Why didn’t you tell shareholders: ‘our penetration rates are phony, our new accounts are phony accounts, and, when we tell you we’re deepening our relationship with our customers, we’re doing so by putting them through the ringer’?” Sherman asked Stumpf.
Wells Fargo stock was priced at around $50 per share, before news of the account falsification settlement broke. The company’s stock has since shed about 10 percent of its value, in the two months that have followed.
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