Wells Tumbles After DOJ Orders Investigation Into Wealth Management Division

Wells Fargo - Warren Buftett's largest investment - is once again making headlines for customer abuses. According to the Wall Street Journal, in the latest alleged criminal violation by the recidivist bank, whistleblowers within Wells Fargo Advisors flagged several issues related to products and services sold to customers "with an eye toward earning more compensation than finding the best fit for the customer." 

In response, the DOJ asked Wells Fargo to assess "whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company's investment and fiduciary-services business," revealed the bank in a Thursday regulatory filing.

The claims include Wells Fargo’s brokerage division, which is known as Wells Fargo Advisors , these people said. Wells Fargo’s former head of that division, Mary Mack, was tapped in July 2016 to clean up its retail banking business. More recently, she was promoted to also lead its consumer lending unit. -WSJ

The bank has hired Shearman & Sterling LLP to look into the allegations, according to people familiar with the matter. In April 2017, Shearman released a 113-page report on the bank's sales and practices issues in the wake of widespread reports into questionable sales conduct affecting up to 3.5 million customers dating back to 2002. 

Wells Fargo was hit with a $185 million regulatory penalty in September 2016. In 2015, they were ordered to pay $15 million to customers who were hit with certain sales fees, while last November they had to pay $3.4 million for unsuitable recommendations of volatility-linked exchange traded products. 

Employees at the bank, which has 40 million retail customers, in some instances issued debit cards without customers’ knowledge and assigned personal identification numbers without telling them, according to the U.S. Consumer Financial Protection Bureau. They also transferred funds from authorized customer accounts to temporarily fund ones without customer permission, according to the allegations, sometimes resulting in fees for insufficient funds.
 -WSJ

Most recently, the federal Reserve slapped wells Fargo with an unprecedented enforcement action, capping the bank's growth. In an early February press release, the Fed said it would bar Wells from expanding its assets beyond their end-2017 level until it "sufficiently improves its governance and controls."

The Fed also demanded that Wells replace three current board members by April and a fourth board member by the end of the year. The release says the board of directors must also improve its oversight practices. The bank will not be allowed to grow until the Fed approves a detail plan of action to be submitted by the bank.

Last year the bank improperly charged nearly 800,000 loan customers and up to 110,000 mortgage customers - which Wells Fargo is issuing refunds to in excess of $100 million. 

Wells Fargo is the third worst performer among the KBW bank index following a steady intraday decline. And, according to Oppenheimer's head of technical analysis, Ari Wald, there are no signs that the stock's relative underperformance is abating.

Comments

swmnguy Theta_Burn Thu, 03/01/2018 - 16:49 Permalink

If you've got any length of time left on your mortgage, go to a credit union.  Go to a few.  Ask them if they sell their mortgages.  Find one that doesn't.  Mine doesn't.  If you have any relationship at all with any major bank, move it to the credit union.  You'll be glad you did.

I have all my personal and business accounts with a credit union.  Credit card, HELOC, first mortgage (almost paid off ahead of schedule), student loans for the kids, HSA, IRA, auto loans (paid off); the works.  I've used my ATM card in probably 25 states and in 8 foreign countries on 3 continents; never a fee from the credit union, and rarely a fee at all except in some podunk area where the local bank or the gas station operator owns the ATM and gouges everybody.

When I need to stop a payment, or set up auto-pay, or alert them to upcoming travel; anything I do; they pull up my file, see I've been with them over 20 years and all of a sudden everything is easy.

Yes, I sound like a shill but really, I never thought I could like the people I do finance with until I went to a credit union.

In reply to by Theta_Burn

VWAndy Thu, 03/01/2018 - 15:49 Permalink

 BTFD. Thats one rock they aint ever gonna turn over. They lost how many deeds in Cali? Turn over that one and all the pensions are gone in a flash. Poof!

VWAndy Thu, 03/01/2018 - 15:54 Permalink

 Prolly blow up the shitshow by now.

 They are either yanking chain here or pulling the pin on the whole thing. Thats my guess.

 Wells is The bad bank.

bunnyswanson Thu, 03/01/2018 - 16:00 Permalink

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Rex Andrus Thu, 03/01/2018 - 16:06 Permalink

Buffett is flush. He will continue to be treated well by his chicomrades when he feigns defection to avoid prosecution, actually leaving in order to avoid civil unrest and radioactive fallout. Congress won't fair as well. They won't have anything left to trade and they have no professional skills...

Boubou Thu, 03/01/2018 - 16:08 Permalink

If they're not careful , Wells is going to give fraud a bad name. How far do they have to go before someone goes to jail?

All they ever do is fine the owners ( shareholders ) while the crooks carry merrily on.

Pazuzu Thu, 03/01/2018 - 16:18 Permalink

My sis in law is regional mgr. for WF. I remember her and my brother being flown to meetings several times in a corpjet. But I get no interest on my savings.

Fuccum.

venturen Thu, 03/01/2018 - 16:29 Permalink

The revenge of Glass Steagall.....One giant conflict of criminal interest! 

 

So far the most corrupt of banks based in NYC are protected....but not forever!

venturen Thu, 03/01/2018 - 16:30 Permalink

Wow fines almost as large as the bonuses for the executive committee...with a FED that rewards any and all banks

 

Something tells me there is no reason to change.

True Blue Hubbs Thu, 03/01/2018 - 18:37 Permalink

Same here. Wachovia sold me "AAA+" rated mortgage backed crap (that turned out to be bad Wachovia loans to deadbeats) and ended up wiping out my and Mrs. Blue's savings in entirety. But, it did pass Wachovia's losses off to me, so they didn't have to take the hit; and the cunt (aptly named 'Cockman') who muppet-fucked us did so well screwing Wachovia's losses off onto their customers that when Wells took over -she got a huge promotion.

Told me all I will ever need to know about Wells Fargo; they will reward anyone who fucks the customer on behalf of the bank.

Every one of 'em deserves to stand in a long damn line of tumbrils awaiting their turn being given the woodchipper treatment.

In reply to by Hubbs

LawsofPhysics Thu, 03/01/2018 - 16:48 Permalink

Okay.  So Wells might actually be a "safer" bank for a while...

 

...no really, when they are under the microscope like this they tend to fucking behave a little better.

"Full Faith and Credit"

same as it ever was. Buy the dip once this bank stock drops...  ...and it will.