SEC Slaps $3 Million Penalty on Former Wells Fargo Executive for Alleged Misleading Statements

The Securities and Exchange Commission (SEC) announced its settlement with Carrie L. Tolstedt, the former head of Wells Fargo & Co.’s (NYSE: WFC) Community Bank, regarding charges brought against her in 2020. 

Tolstedt has agreed to pay a penalty of $3 million following allegations of misleading investors about the success of Wells Fargo’s Community Bank, its core business. The SEC had previously settled related charges against Wells Fargo and its former CEO and Chairman, John Stumpf.

The SEC’s complaint against Tolstedt states that between mid-2014 and mid-2016, she publicly endorsed Wells Fargo’s “cross-sell metric” as a measure of the bank’s financial success. However, it was alleged that this metric was inflated by accounts and services that were either unused, unneeded, or unauthorized. 

The complaint further claims that Tolstedt was aware of misconduct at the Community Bank, where bankers were pushing products on customers that they did not require or want, including the unauthorized opening of accounts. Despite this knowledge, Tolstedt allegedly made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications regarding the accuracy of the bank’s public disclosures.

Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office, stated, “Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws.”

As part of the settlement, Tolstedt neither admitted nor denied the SEC’s allegations but agreed to a final judgment that permanently enjoins her from violating the antifraud and other provisions of the federal securities laws. She will also face a permanent officer-and-director bar.

In addition to the $3 million civil penalty, Tolstedt will pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. The SEC intends to combine this sum with the $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in previous settlements and distribute it to the harmed investors. The settlement remains subject to court approval.

Information for this story was found via the SEC, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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