The Securities and Exchange Commission reached a settlement with the former head of Wells Fargo and Company's Community Bank, involving a $3 million penalty.
Carrie L. Tolstedt was charged in 2020 for allegedly misleading investors about the success of Wells Fargo's Community Bank, according to a May 30 SEC news release. The SEC previously settled related charges against Wells Fargo and its former CEO, John Stumpf.
“Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws,” Monique C. Winkler, regional director of the SEC’s San Francisco Regional Office, said in the release.
The SEC’s complaint says Tolstedt endorsed Wells Fargo's inflated “cross-sell metric,” which measured the bank’s financial success but included unused, unneeded or unauthorized accounts and services, according to the release. Tolstedt was aware of misconduct at the Community Bank, where bankers pushed unnecessary products on customers, including opening unauthorized accounts.
She reportedly made misleading statements to investors and signed inaccurate sub-certifications regarding the cross-sell metric, the release reported. The settlement includes a permanent injunction, officer-and-director bar, a $3 million penalty and disgorgement and prejudgment interest payments.
In addition to the $3 million penalty, Tolstedt will pay disgorgement of $1,459,076 and prejudgement interest of $447,874, the release said. These funds will be added to $500 million from Wells Fargo and the $2.5 million penalty previously paid by Stumpf. The money will be distributed to investors who were affected.
The complaint was filed in the U.S. District Court for the Northern District of California, according to the release. The SEC’s San Francisco Regional Office conducted the litigation, supervised by Jason H. Lee and Winkler.
The settlement is subject to court approval, and the SEC will combine the funds with previous settlements to distribute them to affected investors, the release said.
Tolstedt agreed to a final judgment that permanently enjoins her from violating or aiding and abetting violations of the antifraud and other provisions of the federal securities laws, the release reported.
