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Ex-Wells Fargo CEO John Stumpf misled traders in faux accounts scandal, SEC says

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Ex-Wells Fargo CEO John Stumpf misled investors in fake accounts scandal, SEC says

John Stumpf, chief govt officer of Wells Fargo & Co., waits to start a Home Monetary Providers Committee listening to in Washington, D.C., U.S., on Thursday, Sept. 29, 2016.

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Ex-Wells Fargo CEO John Stumpf and former deputy Carrie Tolstedt had been charged by the Securities and Trade Fee with deceptive traders in regards to the financial institution’s success in promoting a number of merchandise to clients.

Stumpf agreed to pay a $2.5 million civil penalty to resolve the matter, permitting him to keep away from admitting or denying the fees, the SEC mentioned Friday.

The 2 executives had licensed in 2015 and 2016 investor disclosures that touted the agency’s supposedly sturdy “cross-sell” metric, regardless of figuring out it was deceptive, the SEC mentioned in a press release. The metric is an trade time period for what number of merchandise a single buyer has.

Wells Fargo was later discovered to have inflated that metric by placing tens of millions of consumers into merchandise with out their consent, a scandal that price Stumpf his job in 2016 and even that of his successor Tim Sloan. Present CEO Charlie Scharf took over a 12 months in the past and has been tasked with overhauling the fourth largest U.S. financial institution and satisfying regulators’ calls for for higher controls.

“If executives discuss a key efficiency metric to advertise their enterprise, they have to accomplish that absolutely and precisely,” mentioned Stephanie Avakian, director of the SEC’s Division of Enforcement.

The SEC’s grievance, filed in California, expenses Tolstedt with fraud and seeks penalties and to ban her from being an officer or director of a public firm.

In keeping with the SEC’s grievance, Tolstedt publicly endorsed the agency’s vaunted cross-sell metric from 2014 by 2016, even though it was “inflated by accounts and companies that had been unused, unneeded, or unauthorized.”

Earlier this 12 months, Wells Fargo paid $three billion to settle a number of U.S. probes into its operations, together with a $500 million take care of the SEC. The regulator mentioned it would distribute cash collected from Stumpf and the financial institution to traders.