Wells Fargo to pay $1 billion in class-action lawsuit

Wells Fargo to pay $1 billion in class-action lawsuit
The shareholder suit accused the bank of making misleading statements about its compliance with federal consent orders following its 2016 scandal related to unauthorized customer accounts.
MAY 16, 2023
By  Bloomberg

Wells Fargo & Co. agreed to pay $1 billion to settle a shareholder lawsuit that accused it of making misleading statements about its compliance with federal consent orders following the 2016 scandal involving the opening of unauthorized customer accounts.

The settlement is one of the top six largest securities class-action settlements of the past decade, according to lawyers for the investors, who on Tuesday won preliminary approval of the accord from a Manhattan judge.

The investors sued the bank in 2020 claiming that its former chief executive, Tim Sloan, and other executives made misleading statements in testimony before Congress and to investors and the media.

The investors alleged that the executives presented too rosy a scenario about their interactions with regulators, including not disclosing that their initial reform plans had been rejected by authorities.

The proceeds of the settlement will go to investors who bought Wells Fargo stock from Feb. 2, 2018, through March 12, 2020.

“This agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years,” a Wells Fargo spokesperson said. “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”

The news was reported earlier by the Wall Street Journal.

The accord follows a previous settlement four years ago over the bank’s fake-accounts scandal with executives and directors valued at $320 million and a 2018 shareholder accord that cost the company $480 million. In 2020, Wells Fargo agreed to pay $3 billion to settle U.S. investigations into more than a decade of widespread consumer abuses under a deal that let the bank avoid criminal charges.

While the sales abuses had been described repeatedly in earlier probes, the 2020 settlement provided more details on the high-pressure environment that led legions of low-level employees to break the law — often costing them their jobs when they were caught by the firm’s internal controls. Many inside the bank referred to abusive sales practices as “gaming,” according to prosecutors at that time.

Latest News

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

The average retiree is facing $173K in health care costs, Fidelity says
The average retiree is facing $173K in health care costs, Fidelity says

Research reveals a 4% year-on-year increase in expenses that one in five Americans, including one-quarter of Gen Xers, say they have not planned for.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.