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Wells Fargo pays $35M fine for charging excessive advisory fees: SEC

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Published Aug. 25, 2023, 3:58 p.m. ET

Wells Fargo agreed to pay a $35 million civil penalty to settle federal charges that the bank overcharged advisory fees, the Securities and Exchange Commission said on Friday.

The SEC said it charged Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC for overcharging more than 10,900 investment advisory accounts more than $26.8 million in advisory fees.

The SEC alleged that Wells Fargo and its predecessor firms overcharged certain clients who opened accounts prior to 2014 for advisory fees through the end of December 2022.

Wells Fargo was also accused of ripping off these investors by “failing to adopt and implement written compliance policies and procedures reasonably designed to determine whether the billing systems it adopted contained accurate data and to prevent overbilling of the clients.”

“Without admitting or denying the SEC charges,” Wells Fargo agreed to pay the SEC a $35 million penalty.

The world’s fourth-largest bank also agreed to reimburse the affected account holders approximately $40 million.

Wells Fargo has reportedly been overcharging nearly 11,000 investment accounts $27 million in advisory fees over the past decade. Without admitting to the violation, the 171-year-old bank agreed to pay the SEC $35 million.
Wells Fargo has reportedly been overcharging nearly 11,000 investment accounts $27 million in advisory fees over the past decade. Without admitting to the violation, the 171-year-old bank agreed to pay the SEC $35 million. Christopher Sadowski

“Today’s enforcement action underscores the need for firms growing their businesses through acquisition to ensure that their growth does not come at the expense of client protection,” Gurbir Grewal, director of the SEC’s enforcement division, said in a statement.

A Wells Fargo spokesperson told The Post that the San Francisco-based firm is “pleased to resolve this matter.”

“The process that caused this issue was corrected nearly a decade ago. And, as noted in the settlement documents, Wells Fargo Advisors conducted a thorough review of accounts and has fully reimbursed affected customers,” the spokesperson added.

Friday’s settlement with the SEC is just the latest lump sum of cash Wells Fargo has had to dish out to resolve issues lately.

Earlier this month, Wells Fargo was among nine Wall Street banks that were fined over employees’ use of personal messaging apps to discuss deals, trades and other business.

Wells Fargo, BNP Paribas, SocGen, the Bank of Montreal, boutique brokers Wedbush Securities, Moelis & Company, Houlihan Lokey and Japanese brokers Mizuho and SMBC Nikko Securities agreed to pay a combined $289 million to the SEC.

In addition, Wells Fargo was among five banks that were also ordered to pay a further $260 million to the Commodity Futures Trading Commission (CFTC) for similar violations, the regulator said in a separate statement.

The SEC slapped Wells Fargo with a million-dollar fine earlier this month over employees’ use of personal messaging apps to discuss deals, trades and other business.
The SEC slapped Wells Fargo with a million-dollar fine earlier this month over employees’ use of personal messaging apps to discuss deals, trades and other business. REUTERS

All nine firms admitted that from at least 2019 their employees often communicated on personal devices using iMessage, WhatsApp and Signal, the SEC said, in what the regulator said was a “pervasive and longstanding” violation of its record-keeping rules.

While it’s standard practice at most banks to maintain records of employees’ email communications, firms have struggled to get employees to reliably use approved channels for more spontaneous or casual communications.

Back in May, Wells Fargo agreed to pay $1 billion to settle a class-action lawsuit from shareholders over a series of scandals related to the 171-year-old bank’s illegal business practices — which include opening 3.5 million accounts without customers’ permission, imposing surprise overdraft fees on accounts, improperly seizing vehicles and unlawfully freezing accounts.

The billion-dollar settlements was the result of shareholders’ accusations that Wells Fargo overstated how well it was complying with the central bank’s orders.

Since 2018, the embattled bank has operated under consent orders from the Federal Reserve and two other financial regulators requiring that it improve governance and oversight following a string of alleged fraud from 2012 to 2016.

The Fed also put a $1.93 trillion asset cap on Wells Fargo, stunting its ability to compete with rivals JPMorgan, Bank of America and Citigroup.

However, Wells Fargo seemingly hasn’t been improving its track record.

In December, Wells Fargo was slapped with a record $3.7 billion fine over the same illicit practices it was fined for in May.

In December, Wells Fargo was slapped with a record $3.7 billion fine for opening millions of accounts without customers’ permission, imposing surprise overdraft fees on accounts, improperly seizing vehicles and unlawfully freezing accounts.
In December, Wells Fargo was slapped with a record $3.7 billion fine for opening millions of accounts without customers’ permission, imposing surprise overdraft fees on accounts, improperly seizing vehicles and unlawfully freezing accounts. Christopher Sadowski

The massive sum included a $1.7 billion fine imposed by the Consumer Financial Protection Bureau — the largest of its kind in the watchdog agency’s history.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra said in a statement late last year.

“The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”

According to court documents, the bank’s market value has fallen by more than $54 million over two years, ending March 2020, as wrongdoings have become public.