California Treasurer John Chiang announced this week that the state has decided to extend the sanctions it imposed against Wells Fargo & Co. (WFC) for one more year. The bank is barred from doing business with California in the wake of the sales practice scandal involving the set up of at least two million unauthorized credit card and bank accounts. Wells Fargo agreed to pay $185M to regulators to resolve related charges.
As the country’s largest municipal debt issuer, California oversees a $75B investment portfolio. Its sanctions include suspending the state’s investments in Wells Fargo Securities, barring the bank from being used as a brokerage firm to buy investments, and prohibiting it from serving as bond underwriter whenever Chiang is authorized to appoint said underwriter.
When explaining why he sought to extend the state’s sanctions, Chiang pointed to recent disclosures, including that Wells Fargo overcharged veterans in a federal mortgage-refinancing program and, in another program, made loan borrowers pay for unnecessary insurance. The state treasurer sent a letter to Wells Fargo’s board and its Chief Executive Tim Sloan noting that a number of demands have to be fulfilled before he will lift the sanctions.
Wells Fargo said that it has satisfied and “exceeded” the California Treasurer’s expectations.
However, a day after Chiang’s announcement of the extended sanctions, Wells Fargo on Tuesday won a bid for $554M of California bonds at auction. According to Bloomberg, the bank got around the ban because it is only applicable to sales overseen by an underwriter that was retained in advance, which applies to about 75% of muni bond offerings. The ban does not bar Wells Fargo from auctions.
California is not the only state to extend sanctions against the bank. Ohio Governor John Kasich recently extended his state’s ban on Wells Fargo. Similar bans were imposed against the bank in New York City, Illinois, and Massachusetts. The city of Chicago, however, has lifted its ban.
FINRA Orders Wells Fargo to Pay Over $3.4M Over ETP Sales
The California ban on Wells Fargo’s involvement in its muni bonds is not the only reason that the bank made headlines this week. On Monday, the Financial Industry Regulatory Authority announced that Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network would pay more than $3.4M in customer restitution for unsuitable recommendations involving exchange-traded products, as well as for related supervisory failures. Wells settled without denying or admitting to the regulator’s charges.
At Shepherd Smith Edwards and Kantas, LTD LLP, our Wells Fargo ETP fraud lawyers are currently offering free case assessments to customers who think they may have suffered related losses. Contact us today.
Wells Fargo Fires Currency Trading Bankers in the Wake of Probe
The Wall Street Journal reports that the bank has fired four forex bankers in the wake of probes by regulators and the bank into the lender’s currency trading practices. The men who were let go are Simon Fowles, Jed Guenther, Bob Gotelli, and Michael Schaufler. Another Wells Fargo employee, Sara Wardell-Smith, is no longer the bank’s forex trading and sales global head. She is now in charge of the America’s region for the lender’s financial institutions group. According to the WSJ, the reason that the men were fired and Wardell-Smith reassigned had to do with a “specific transaction” involving a client.
Wells Fargo Under Fire Over Unnecessary Auto Insurance Fees
The New York Times reports that the the Office of the Comptroller of the Currency sent a confidential preliminary report that scolded the bank for making hundreds of thousands of borrowers purchase unnecessary car insurance when they took out an auto loan. An internal report obtained by the Times earlier this year indicated that over 800,000 people who received car loans from Wells Fargo paid for car insurance even usually they already had coverage.
Wells Fargo has designated $80M to compensate some 570,000 of these customers, but the comptroller’s office believes that there are more victims and that the total compensation will be higher. Wells Fargo’s auto insurance program was shut down last year.
Treasurer Chiang Keeps Sanctions in Place Against Wells Fargo, Ca Treasurer, October 16, 2017
Despite state ban, Wells Fargo wins bond auction to sell $554 million of California debt, Biz Journals, October 19, 2017
Wells Fargo Fires Four Foreign-Exchange Bankers as Woes Spread to Investment Bank, WSJ, October 20, 2017
Regulator Blasts Wells Fargo for Deceptive Auto Insurance Program, NY Times, October 20, 2017
More Blog Posts:
Wells Fargo Brokerage Firms Ordered to Pay $3.4M Over Unsuitable Exchange-Traded Product Recommendations, Stockbroker Fraud Blog, October 16, 2017
NY Investment Adviser Accused of Bilking a Non-Profit of $9M, Institutional Investor Securities Blog, October 23, 2017
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