SEC Probing Wells Fargo Around Sales-Practice Disclosures

The Securities and Exchange Commission is probing whether Wells Fargo & Co. violated rules around investor disclosures and other matters relating to its recent sales tactics scandal, people familiar with the matter said.

The SEC sent requests for information to the bank asking for documents in recent weeks, following three Democratic senators’ calls in late September for the SEC to investigate whether Wells Fargo misled investors and violated whistleblower protections while allegedly engaged in illegal sales practices, one of these people said. The probes are in an “early stage,” this person added.

Wells Fargo has faced public and political outrage after paying a $185 million fine related to sales practices. The San Francisco bank opened as many as 2 million customer accounts with fictitious or unauthorized information. The bank has said it fired 5,300 employees over five years.

Soon after two congressional hearings on the matter, then-Chief Executive John Stumpf resigned. Wells Fargo still faces many state and federal investigations, including by the Justice Department.

Wells Fargo investors and analysts will be watching to see what new CEO Tim Sloan, who was recently the bank’s chief operating officer, has to say at an investor conference Thursday. He’s slated to appear with new retail banking head Mary Mack. It is likely the SEC probes will be addressed, one of these people said. A spokesman for the SEC couldn’t be reached for comment.

Sens. Jeff Merkley (D., Ore.), Elizabeth Warren (D., Mass.) and Robert Menendez (D., N.J.) called in September for the SEC to investigate whether Wells Fargo misled investors and violated whistleblower protections while allegedly engaged in illegal sales practices. In late September the senators wrote a letter to SEC Chairman Mary Jo White urging the regulator to probe further, according to a copy of the letter reviewed by The Wall Street Journal.

The senators, all members of the banking committee, wrote in the letter that the situation at Wells Fargo does “justify an investigation” for multiple reasons.

One focuses on whether the bank’s executives violated the internal-controls provision of Sarbanes-Oxley by signing off on inaccurate financial reporting, the letter noted.

Sen. Merkley asked the Comptroller of the Currency, Thomas Curry, during the Senate Banking Committee hearing in late September if the SEC should launch an investigation related to the Sarbanes-Oxley reports. The banking regulator replied: “I’ll leave that to the SEC.”

Second, the senators asked the SEC to look at whether the bank committed securities fraud by failing to disclose problems with fake accounts while promoting its so-called cross-sell ratio to investors.

Finally, the letter urged the SEC to inquire whether the bank violated whistleblower-protection laws by firing employees who tried to report misconduct.

Wells Fargo has said it didn’t disclose its discussions with regulators because the settlement was “not material.” In the following weeks, the bank in a securities filing disclosed the Justice Department investigation as well as other state and federal examinations and investigations that are ongoing. The bank has said it is responding and continues to respond to requests.