There are moments when even the most prominent financial corporations are stuck with substantial fines. This was proven again with the announcement that the Securities and Exchange Commission charged Wells Fargo & Co. This significant fine follows after the well-known Wall Street bank had misled their investors. Misleading factor and advice were provided with falsified details regarding their business strategy. Wells Fargo & Co created fake accounts under customer information and then sold products that weren’t being documented. It created an epidemic of financial and illegal problems for numerous investors, who demanded that the Securities Exchange Commission charge Wells Fargo.
Wells Fargo didn’t have many options with this fine, having multiple clients provide suspicious evidence that indicated the involvement of unaware products being sold. This would’ve only been accomplishable through Wells Fargo, as they maintained detailed data regarding all their clients. The $500 million being given to SEC through this fine is being returned to consumers, with an additional $2.5 billion settlement confirmed with the Department of Justice. This means Wells Fargo is paying a total of $3 billion for their illegal actions.
The Co-Director for the Division of Enforcement under SEC, Stephanie Avakian, spoke to reporters regarding this settlement. She stated: “Wells Fargo repeatedly misled investors, including through a misleading performance metric, about what it claimed to be the cornerstone of its Community Bank business model and its ability to grow revenue and earnings. This settlement holds Wells Fargo responsible for its fraud and furthers the SEC’s goal of returning funds to harmed investors.”
The Timeframe
The Securities & Exchange Commission confirmed that the majority of these illegal actions were completed between 2012 – 2016. Investors were advertised that successful returned from the “Cross-Well Strategy” with Community Bank were being seen. This strategy required additional financial products to be sold to existing customers, with SEC believing Wells Fargo implemented this service to create an in-house monopoly.
Even the commission cannot determine how much Wells Fargo earned through their illegal financial strategies. Over four years, clientele became entirely reliant on the Cross-Well Strategy. Accounts that weren’t active with Wells Fargo were inflated, allowing for an increased presence of “New Customers” for pre-existing clients. This allowed Wells Fargo to appear that they were selling financial products on behalf of their clients. It was all a Ponzi Scheme to a level that Wall Street hasn’t seen since Jordan Belfort.