In the latest fallout from a fake-accounts scandal, three Democratic senators are raising questions about whether Wells Fargo retaliated against whistleblowers by filing defamatory reports with a regulator.
The senators said they have obtained new information from the Financial Industry Regulatory Authority, a securities industry regulator, that shows Wells Fargo submitted over 200 reports with FINRA for employees who were fired for actions related to the scandal.
News reports have suggested that Wells Fargo may have violated FINRA rules by filing incomplete or inaccurate forms for fired employees, possibly as a retaliatory action for flagging wrongdoing inside the bank, Sens. Elizabeth Warren of Massachusetts, Ron Wyden of Oregon and Bob Menendez of New Jersey wrote in a letter Thursday to new Wells CEO Tim Sloan.
“If Wells Fargo submitted false or incomplete information about the fired employees in its mandatory disclosures to FINRA, the bank may have violated FINRA rules and misled regulators about the scope of the fraud,” the senators wrote. Such violations can result in fines and other penalties.
On Sept. 8, Wells agreed to pay $185 million in fines to the Consumer Financial Protection Bureau and other agencies to resolve allegations that its employees, racing to meet aggressive sales goals, opened millions of accounts that customers may not have authorized going back until at least 2011. That spurred customer outrage, congressional hearings, new investigations and the retirement of Sloan’s predecessor, John Stumpf.
Wells Fargo has a brokerage arm that has financial advisers in bank branches and separate Wells Fargo Advisors offices that offer mutual funds, stocks, bonds and other products to clients. When an employee is fired or leaves a securities firm, the company is required to file a “Form U5” with FINRA.
Wells’ filing of 200 U5 forms suggests the bank had “ample information about the scope of fraudulent sales practices” at the company long before its Sept. 8 settlement and raises questions about “Wells Fargo’s response to this illegal activity,” the senators wrote in their letter.
Wells Fargo has previously said it fired about 5,300 employees for opening unauthorized accounts between 2011 and early 2016. FINRA told the senators that of those employees, slightly more than 600 were also registered with Wells Fargo’s brokerage arm, Wells Fargo Advisors.
Of those 600 employees, 207 were fired for reasons specifically related to the accounts scandal, FINRA told the senators. For the other 400, it’s not clear if the bank filed U5 forms detailing different reasons for their firing or if no U5 forms were filed at all. FINRA is reviewing the situation with Wells Fargo, according to the letter.
The numbers raise questions about the accuracy of Wells Fargo’s Form U5s, the senators wrote. If the bank did not report all appropriate information on fired employees or misrepresented information about employees who were fired for flagging illegal activity, the bank “may have deprived FINRA and other regulators of information that could have allowed them to uncover and stop the illegal activity at Wells Fargo” before September, they wrote.
FINRA in a statement said it “takes seriously the integrity and accuracy of all filings made by firms, including Form U5s. With respect to Wells Fargo, we are reviewing the accuracy of filings made by the firm with regard to individuals involved in the cross-selling activities that are the subject of the CFPB action.”
The agency announced last month that it’s conducting an industrywide inquiry regarding bonuses paid by brokerages to employees for promoting the company’s own bank products and for opening additional brokerage accounts. Firms are supposed to report by Nov. 15 on their cross-selling programs going back until January 2011.
The senators, who have raised questions about other Wells Fargo practices in the scandal, sent a series of questions to Sloan that they want answered by Dec. 5.
Wells Fargo spokeswoman Jennifer Greeson Dunn said that the bank seeks to provide “complete and accurate information” on its Form U5s and reviews the matter if an employee raises concerns. Of the 5,300 terminated employees, a little more than 10 percent, or 530, were licensed and required a U5 when they were let go, the bank said. The 207 fired over five years equate to less than 1 percent of the retail bank’s employee total in a given year.
As it has previously stated, the bank is helping employees who were terminated, including those with U5 forms, to apply for available positions at the bank if they are eligible for rehiring, Dunn said.
“Wells Fargo has been working for years to stop wrongful sales practices behavior well before” the September settlements, she said. “However, we acknowledge we could have acted sooner and more aggressively.”
The bank has “zero tolerance” for retaliation against employees, Dunn said, adding the bank is “investigating claims regarding these matters and doing an end-to-end review” of its ethics hotline.