Wells Fargo Faces Scrutiny Again for Employee Misconduct
Wells Fargo & Company WFC has landed in trouble again thanks to its employees, who reportedly modified or added false information related to corporate customers, without their knowledge, in order to meet a regulatory deadline. The news was first reported by The Wall Street Journal.
Despite strict regulatory scrutiny and promises made by Wells Fargo to improve internal controls, disclosure of such misconducts continues to shake investors’ confidence in the stock. Shares of Wells Fargo dropped 1.5% in yesterday’s trading session.
Per the report, the scandal happened between late 2017 and first few months of 2018. Employees at its Wholesale Banking segment added or changed some personal information such as birth dates, social security numbers and addresses of clients during that period.
Citing people familiar with the matter, Wall Street Journal reported that Wells Fargo has been facing a Jun 30 deadline to comply with a regulatory order related to anti-money laundering controls.
In an internal investigation, Wells Fargo became aware of these misdoings. The matter is currently under investigation by the Office of the Comptroller of the Currency.
A spokeswoman at Wells Fargo said, "This matter involves documents used for internal purposes. No customers were negatively impacted, no data left the company, and no products or services were sold as a result."
Last week, Wells Fargo had launched an ad-campaign — Re-Established — with an aim to gain back the lost reputation by highlighting steps it has taken to repay customers and change its practices.
However, findings of these sort continue to test regulators tolerance toward Wells Fargo’s wrongdoings. In its Investors’ Day held on May 10, the bank said that it expects to continue operating with the regulatory cap on its assets till the first part of 2019. This disclosure might extend that to an even longer time.
Also, the company’s bottom-line remains under pressure due to unstable revenues. However, the bank has an impressive cost-control program underway, which might help it deal with the legal costs and improve financials.
Shares of Wells Fargo have gained 2.1% in the past year, significantly underperforming the industry’s rally of 20.9%.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
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