SEC accuses former Wells Fargo CEO and top executive of misleading investors over success of core business

• The Securities and Exchange Commission on Friday accused former Wells Fargo CEO John Stumpf along with another senior executive of intentionally misleading investors about the US bank’s core business.
• Carrie Tolsted, former head of the community bank, would have known that a key sales metric was inflated, but was still using it as a metric of success.
• Stumpf signed and certified documents with the SEC in 2015 and 2016 when he should have known they were misleading, the regulator said.
• The former CEO has agreed to pay a fine of $ 2.5 million, and the regulator will take legal action against Tolstedt for fraud.
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The US SEC has accused former Wells Fargo CEO John Stumpf of misleading investors about the success of its core business, according to a Friday filing.

Former community bank manager Carrie Tolsted was hit with the same charge. From mid-2014 to mid-2016, Tolsted reportedly trumpeted the bank’s key sales metric as a measure of success. The metric was in fact fraudulent and inflated, based on accounts and services that were “unused, unnecessary or unauthorized,” the SEC said.

Tolsted signed deceptive documents on the bank “when it knew or was reckless not to know that the statements in these disclosures regarding the Wells Fargo cross-selling metric were materially false and misleading,” the regulator said.

Former CEO Stumpf signed and certified documents with the regulator in 2015 and 2016, when he should have been aware of their deceptive nature, the SEC said.

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“According to the order, Stumpf failed to ensure the accuracy of its certifications after being told that Wells Fargo was misleading the public about the cross-selling metric,” the SEC said.

In response to the latest accusation, Wells Fargo reiterated a previous statement that at the time of its sales practice problems the bank did not have “the right people, structure, processes, controls or culture to prevent inappropriate conduct ”.

Stumpf has agreed to pay a fine of $ 2.5 million to cover the agency’s fees, and the regulator will take the fraud charges against Tolstedt to court.

“If executives are talking about a key performance measure to promote their business, they need to do it completely and accurately,” Stephanie Avakian, director of the SEC’s Enforcement Division, said in a statement. . “The Commission will continue to hold accountable not only top executives who make false and misleading statements, but also those who certify the accuracy of misleading statements despite warnings to the contrary.”

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