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SEC Charges Former Wells Fargo Executives For Misleading Investors About Bank Performance

The U.S. Securities and Exchange Commission charged former Wells Fargo & Co. (WFC) Chief Executive Officer John Stumpf and former head of Wells Fargo's Community Bank Carrie Tolstedt for their roles in allegedly misleading investors about the success of the Community Bank.

Stumpf, who stepped down from his top post in 2016, settled the charges without admitting or denying them. He agreed to pay a civil penalty of $2.5 million. The agency will combine the money with $500 million paid by Wells Fargo in a previous settlement and distribute the sum to harmed investors, the SEC said in a statement.

In addition, the SEC filed a litigated action in the U.S. District Court for the Northern District of California alleging that Tolstedt committed fraud. The agency's complaint charged her with violating the anti-fraud provisions of the federal securities laws. It seeks a permanent injunction, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar.

The SEC previously filed settled charges against Wells Fargo for engaging in the misconduct.

The SEC's order against Stumpf found that in 2015 and 2016 he signed and certified statements filed with the Commission, which he should have known were misleading, regarding both Wells Fargo's Community Bank cross-sell strategy and its reported metric.

According to the order, Stumpf failed to assure the accuracy of his certifications after being put on notice that Wells Fargo was misleading the public about the cross-sell metric.

As per the SEC's complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo's "cross-sell metric" as a means of measuring Wells Fargo's financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized.

The complaint also alleged that Tolstedt signed misleading sub-certifications as to the accuracy of Wells Fargo's public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo's cross-sell metric were materially false and misleading.

In February, the U.S. Attorney's Office said that Wells Fargo agreed to pay $3 billion to settle criminal and civil probes into fraudulent sales practices involving the opening of millions of accounts without customer authorization. Wells Fargo's $3 billion payment includes a $500 million civil penalty to be distributed by the SEC to investors.

Wells Fargo has admitted that between 2002 and 2016 it pressured employees to meet unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers' identities," the department said in a statement.

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