Three Democratic senators asked the Securities and Exchange Commission to investigate whether Wells Fargo & Co. misled investors and violated whistleblower protections while allegedly engaging in illegal sales practices.
Sens. Jeff Merkley (D., Ore.), Elizabeth Warren (D., Mass.) and Robert Menendez (D., N.J.) wrote a letter to SEC Chairman Mary Jo White urging the regulator to probe further into whether Wells Fargo and its senior officials “violated laws by misleading investors and firing whistleblowers while the bank oversaw the creation of millions of unauthorized, fraudulent accounts.”
A copy of the letter was reviewed by The Wall Street Journal. A Wells Fargo spokesman had no immediate comment. An SEC spokesperson couldn’t be reached for immediate comment.
Wells Fargo paid a $185 million settlement and entered into an enforcement action earlier this month with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Los Angeles City Attorney’s Office after it became clear 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. But it is facing increasing political pressure and public outrage after Chief Executive John Stumpf was grilled at a Senate Banking Committee hearing last week and next faces the House Financial Services Committee Thursday morning.
The three senators, all members of the banking committee, said the situation at Wells Fargo does “justify an investigation into at least three types of securities law violations,” according to the letter. The first focuses on whether the bank’s executives violated the internal-controls provision of the Sarbanes-Oxley Act by signing off on inaccurate financial reporting.
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.
The bank has said it didn’t disclose its discussions with regulators because the settlement was “not material.” Wells Fargo released a statement this week saying “our management team…is dedicated to strengthening our culture and taking strong actions to ensure this conduct does not happen again.”
In a message to employees Tuesday, Mr. Stumpf said he “should have acted sooner and more aggressively to correct weaknesses in our operations.”
The senators point out that Mr. Stumpf said at the hearing last week that he knew of problems in 2013, but the bank never disclosed that information to investors until Wells Fargo settled with regulators and the Los Angeles city official on Sept. 8. The senators also flagged media reports that include “accounts of employees who tried to act as whistleblowers by reporting the misconduct being fired shortly thereafter.”