Wells Fargo hit with class action lawsuit over sales practices

A Wells Fargo Bank is shown in Charlotte, North Carolina.
A Wells Fargo Bank is shown in Charlotte, North Carolina.PHOTO: REUTERS

NEW YORK (REUTERS) - A shareholder class action lawsuit was filed against Wells Fargo & Co on Monday (Sept 26) that alleged the firm misled investors about its financial performance and the success of its sales practices.

Wells Fargo, the United States' third-largest bank by assets, agreed to pay US$190 million (S$258.4 million) earlier this month to settle regulatory charges that some of its employees opened as many as two million accounts without customers' knowledge, in order to meet sales targets.

Robbins Geller Rudman & Dowd announced the lawsuit and is seeking class action status on behalf of buyers of the company's shares between Feb 26, 2014 and Sept 15, 2016.

The lawsuit, which was filed in the US District Court of Northern California, comes nearly a week after Wells Fargo chief executive John Stumpf faced US Senate lawmakers about his oversight at the bank.

It also singled out Mr Stumpf and Carrie Tolstedt, the now-retired executive at the centre of the scandal, for selling more than US$31 million of their stock in Wells Fargo at "artificially inflated" prices.

Wells Fargo has said its board will assess whether to cancel or claw back any incentive compensation paid to Ms Tolstedt.

The complaint also criticises the firm's cross-selling strategy, saying it failed to disclose material facts about its practices that were aimed at fulfilling sales quotas.

Wells Fargo has long been the envy of the banking industry for its ability to sell multiple products to the same customer.

The bank has said it has fired 5,300 people over the matter and would eliminate sales goals in its retail banking on Jan 1, 2017.

Wells Fargo declined to comment on the matter.

Up to Monday's close, shares of the company have fallen more than 10 per cent since Sept 8 when it reached a settlement with regulators, wiping off more than US$25 billion of market capitalisation.