Wells Fargo & Co. confirmed Thursday that the U.S. Securities and Exchange Commission has joined the growing number of state and federal agencies investigating the company’s sham-accounts scandal.
The SEC, along with the U.S. Department of Justice, state attorneys general, congressional committees and others, have “undertaken formal or informal inquiries, investigations or examinations arising out of certain sales practices of the company,” the San Francisco bank said in a regulatory filing.
The SEC declined to comment, but the agency’s decision to look into the scandal was not unexpected.
In September, three Democratic senators — Elizabeth Warren of Massachusetts, Jeff Merkley of Oregon and Robert Menendez of New Jersey — asked the agency to investigate whether the bank and its senior executives violated federal law by failing to disclose in filings that there were problems with unauthorized accounts.
The senators also wanted the SEC to determine whether Wells Fargo violated whistle-blower protection laws by firing employees who tried to report the problems.
Wells Fargo has been under increased scrutiny since revelations that employees at the bank created as many as 2 million accounts in customers’ names without those customers’ knowledge or consent. Regulators have said workers created those accounts as they tried to meet unrealistic sales goals.
The scandal was uncovered by a 2013 Times investigation and ultimately led to a $185-million settlement with local and federal regulators Sept. 8 and the sudden retirement of Chief Executive John Stumpf last month.
“The company has responded, and continues to respond, to requests from a number of the foregoing seeking information regarding these sales practices and the circumstances of the settlements and related matters,” Wells Fargo said in the regulatory filing.
The bank added that a “number of lawsuits” have been filed by “non-governmental parties seeking damages or other remedies related to these sales practices.”
Wells Fargo also upped its maximum estimate of “reasonably possible” potential losses from litigation to $1.7 billion from the $1 billion it had listed in June. The bank said that this increase was “related to a number of matters.”
The filing noted that the bank is in discussion with federal agencies that are members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, which is investigating mortgage practices that led up to the financial crisis. The group, which includes the Justice Department, was involved in the historic $16.7-billion settlement reached with Bank of America in 2014 over its mortgage business.
Meanwhile, at a conference in Boston, Wells Fargo’s new CEO, Timothy Sloan, and its new head of retail banking, Mary Mack, provided additional details of how the bank is addressing internal problems that led to the sales scandal.
Sloan said the bank will hire an outside consultant to review sales practices across the company, not just in the the bank’s retail business. The bank is also reviewing claims that employees were fired or otherwise retaliated against after reporting fraudulent practices to the company’s internal ethics hotline.
He said Wells Fargo is also reaching out to former employees who were fired for not meeting sales goals.
The bank has scrapped sales goals in its incentive compensation system and is in the process of devising a new system. Mack said the new system will focus not on the number of accounts and services sold to customers, but on how those accounts and services are used.
That aims to address criticism that, under the bank’s old system, workers were incentivized to open accounts that customers might never use and often didn’t even know about.
Mack also said the bank has hired a new risk officer, Vic Albrecht, for the retail banking division.
Albrecht will not report to Mack, but rather to Wells Fargo’s chief risk officer, a change that Mack said would “create a stronger risk and control foundation that will provide a more independent and credible challenge to how we operate.”
Shares of Wells Fargo closed up 10 cents to $45.34 but are off about 9% since the day before the September settlement.
3:10 p.m.: This article was updated to include comments made by Wells Fargo executives at a Thursday conference, more details from the SEC filing, the stock price and additional background.
9:55 a.m.: This article was updated to include Wells Fargo’s increase in its high-end estimate of possible litigation losses.
This article was originally published at 7:45 a.m.