The Securities and Exchange Commission on Friday charged former Wells Fargo (WFC) - Get Report Chief Executive John Stumpf with misleading investors about the success of the bank's core business, Community Bank.
The SEC also charged Carrie Tolstedt, former head of the Community Bank.
Stumpf settled the charges without admitting or denying them. He agreed to pay a $2.5 million penalty.
The SEC also filed a litigated action, alleging that Tolstedt committed fraud. The agency's complaint charges her with violating antifraud provisions of the federal securities laws.
It seeks a permanent injunction, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar, a statement from the agency said.
The SEC filed its complaint in U.S. District Court for the Northern District of California.
The agency previously filed settled charges against Wells Fargo itself for engaging in the misconduct.
The SEC’s order against Stumpf finds that in 2015 and 2016 he signed and certified statements filed with the SEC that he should have known were misleading. The statements regarded 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 for the SEC complaint against Tolstedt, from mid-2014 through mid-2016, the agency charges that she publicly described and endorsed Wells Fargo’s cross-sell metric as a measurement of 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 alleges 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.
Wells recently traded little changed at $23.80. They have fallen 56% year to date amid the economy’s stumble and the bank’s woes.