Today, the Securities and Exchange Commission (SEC) announced a settlement with former Wells Fargo & Co. head of Community Banking, Carrie L. Tolstedt, in which she has agreed to pay a $3 million penalty for her role in allegedly misleading investors about the success of the Community Bank. This settlement follows the SEC’s previous settlement with Wells Fargo and its former CEO and Chairman, John Stumpf.
According to the SEC’s complaint, Tolstedt misled investors by publicly describing and endorsing Wells Fargo’s “cross-sell metric” as a measure of financial success, even though this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. Tolstedt was aware of the misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts.
In addition, Tolstedt made false and misleading statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures.
“Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office.
The settlement requires Tolstedt to pay a $3 million civil penalty, disgorgement of $1,459,076 plus prejudgment interest of $447,874. This money, along with $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in previous settlements, will be distributed to harmed investors. The settlement is subject to court approval.
This settlement serves as a reminder that those who mislead investors and violate the securities laws will be held accountable, no matter their position. The SEC’s complaint was filed in the U.S. District Court for the Northern District of California and the litigation was conducted by Susan LaMarca, Erin Wilk, Victor Hong, John Roscigno, and Horace Austin of the SEC’s San Francisco Regional Office. The case was supervised by Jason H. Lee and Ms. Winkler.
