Well Fargo & Co. (WFC) shares are expected to open sharply lower Monday after the U.S. Federal Reserve said it can't grow any further until its submits a plan that proves it has beefed-up its risk management and board oversight following a 2016 "fake accounts" scandal that rocked the country's third-largest bank.

Citing "recent and widespread consumer abuses and other compliance breakdowns" in a Friday statement that coincided with the end of Janet Yellen's four-year term as Fed chair, the central bank also demanded three new Wells Fargo board members by April and a fourth by the end of the year. The Fed's so-called "consent order" will cut the bank's full-year profits by between $300 million and $400 million, Wells Fargo said.

"We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," Yellen said. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."

Wells Fargo shares were marked 9.5% lower in pre-market trading Monday, indicating an opening bell price of $57.99 each, a move that would trim their three-month gain to 2.9%. 

Wells Fargo is famously Warren Buffett's largest single investment, and even after trimming some shares last year, the head of Berkshire Hathaway (BRK.A) till held more than 450 million shares of the bank, according to the latest 13F filing with the SEC from November.

TheStreet's founder, Jim Cramer, said Friday on CNBC's Mad Money program that the timing of the Fed statement, in the middle of an already confusing day for U.S. investors, was curious, given that many investors assumed Wells had put their fraudulent account issues behind them. 

Wells Fargo agreed to a $190 million with the U.S. Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in 2016 after it was revealed that bank employees had created more than 3.5 million "fake accounts" in order to meet internal targets imposed by management. 

"We are in a very competitive business whether we have a consent order or not," said Wells Fargo CEO Time Sloan. "Our marching orders to our team are, go out and serve your customers, fulfill our vision, take deposits, make loans. We are open for business."

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