Wells Fargo's (WFC) Settlement of $1B Is Approved by Judge
Wells Fargo & Company’s WFC agreement to pay $1 billion pursuant to the class action lawsuit related to overstating progress on resolving 2016 fake account scandal has been approved by the federal judge, per a Bloomberg article.The settlement has been authorized after more than three months of the deal.
The federal judges’ authorization has not yet been confirmed by the court records.
Since 2018, WFC has been under orders from Federal Reserve and two other financial regulators to improve its governance and oversight. The bank’s shareholders alleged that Wells Fargo and its past management misinformed them about how swiftly it was addressing governance issues and risk-management systems due to which it opened millions of fake accounts.
Accordingly, when these shortcomings surfaced, the bank's market value fell by more than $54 billion over two years ending in March 2020. However, Wells Fargo denied any wrongdoing and decided to settle to eliminate further litigation expenses. It agreed to pay $1 billion in May 2023 to settle the claims.
The settlement amount paid by Wells Fargo will be given to the investors who had bought the stock from Feb 2, 2018 through Mar 12, 2020.
WFC has a long list of pending legal cases and remains under close supervision of the regulatory authorities. Last month, it agreed to pay a civil penalty of $35 million to settle Securities and Exchange Commission’s (SEC) claimfor overcharging advisory fees of more than $26.8 million in over 10,900 investment advisory accounts.
Further, in the first quarter of 2023, Wells Fargo agreed to pay $300 million, settling a class action suit claiming that the bank had pushed unnecessary insurance on auto loan customers. These affect operational efficiency of the bank as well as increases cost, thereby hindering its bottom-line growth.
Wells Fargo’s shares have gained 7.6% over the past six months compared with the industry’s growth of 2.7%.
Image Source: Zacks Investment Research
WFC presently carries a Zacks Rank #3 (Hold). You cansee the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Misconduct by Other Firms
Last month, The Goldman Sachs Group, Inc. GS was charged with a civil penalty of $5.5 million, per Commodity Futures Trading Commission’s (CFTC) order. Further, the order requires GS to cease and desist from committing future violations of Commodity Exchange Act and CFTC’s record-keeping provisions.
Per CFTC’s findings, GS violated the provisions of a previous order, and also failed to appropriately record and retain certain audio files.
Citigroup Inc. C had consented to SEC’s cease-and-desist order last month, levying a civil penalty of $2.9 million on the bank. The bank’s broker-dealer unit had been charged for intentionally violating record-keeping requirements with respect to expenses incurred in its underwriting business.
C neither denied nor admitted the alleged claims of SEC’s findings.
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