The Securities and Exchange Commission (SEC) has settled with the former head of Wells Fargo & Co.'s Community Bank, Carrie L. Tolstedt. As part of the settlement, Tolstedt has agreed to pay a $3 million penalty related to charges brought in 2020.
According to the SEC's complaint, Tolstedt misled investors about the success of Wells Fargo's Community Bank, the company's primary business division. Specifically, Tolstedt endorsed and publicly promoted Wells Fargo's "cross-sell metric" from mid-2014 to mid-2016. This metric was used to measure the bank's financial success, but it was inflated by accounts and services that were either unused, unneeded, or unauthorized.
The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately reflect customers' genuine needs or usage since she was aware of misconduct within the Community Bank, including the opening of unauthorized accounts. Tolstedt also made misleading public statements 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 when she knew or was reckless in not knowing that statements in those disclosures regarding the cross-sell metric were materially false and misleading.
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 without admitting or denying the allegations. The SEC has also imposed a permanent officer-and-director bar. Tolstedt has been ordered to pay disgorgement of $1,459,076, plus prejudgment interest of $447,874, in addition to the $3 million civil penalty.
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