Wells Fargo & Co. said its sales scandal is being investigated by the U.S. regulator that ensures public companies make adequate disclosures to investors.
The San Francisco-based bank disclosed the Securities and Exchange Commission probe Thursday in a regulatory filing. The SEC review adds to regulatory headaches for the bank, which has faced a barrage of criticism and calls for closer scrutiny since agreeing in September to pay $185 million over claims that employees opened as many as two million unauthorized accounts.
“The company has responded, and continues to respond, to requests” from regulators seeking information on its sales practices, the settlements and related matters, according to the filing.
Lawmakers called on the SEC, the Department of Justice and others to look more deeply at Wells Fargo amid the public furor over the customer account scandal, which forced the retirements of Chairman and Chief Executive Officer John Stumpf and Carrie Tolstedt, the executive who was in charge of the community banking unit.
The bank has fired 5,300 workers and said it would eliminate sales goals linked by regulators to its cross-selling strategy.
The SEC often reviews whether public companies have failed to disclose issues that are material to shareholders, which typically encompasses information that could impact their investment decisions.
Still, the SEC frequently decides against bringing enforcement cases based solely on this test.
“Materiality is what a reasonable investor would consider to be important as part of the overall info he or she looks at when making an investment decisions,” according to Jonathan Macey, a Yale Law School professor.
In the Wells Fargo case, one question is whether the $185 million settlement should have been considered material for a company that reports billions of dollars in profits.
The SEC also may be examining whether executives falsely touted the growth in sales numbers with many of the accounts were fake.
Lawmakers from both major parties have questioned whether Wells Fargo misled investors by failing to disclose the investigation that led to the September settlement.
There have also been concerns raised about whether employees who reported wrongdoing through internal channels were mistreated.
Three Senate Democrats led by Elizabeth Warren of Massachusetts wrote to the SEC in September, asking the agency to investigate whether the bank violated whistleblower protection laws by firing employees after they tried to report misconduct.
Democrats in the U.S. House of Representatives, including Gwen Moore of Wisconsin, have also said they’ve heard from whistleblowers in their districts who were pushed out after reporting misconduct.