Wells Fargo found itself in some legal hot water after being slapped with a class action securities fraud lawsuit that was filed by investors. The claim noted that the banking giant made omissions and misstatements in the disclosures it provided to those investors.
The issue here is that federal law required that the company should have informed shareholders that there were nonroutine legal matters going on. Instead, the company remained quiet about the regulatory investigation into fraudulent customer accounts. The talks with the Consumer Financial Protection Bureau commenced in March of 2016, but the investors didn't find out until September of that year when the problem was made public.
Wells Fargo recently agreed to a $480 million settlement, but stopped short of accepting responsibility. A statement issued noted that the payment was based on wanting to avoid disruption and cost that is associated with further litigation. This settlement hasn't been approved by the federal judge yet, so the final resolution is still up in the air.
While this settlement might end one part of Wells Fargo's troubles, it won't end them all. The company's sales tactics are being investigated by the Securities Exchange Commission, the Justice Department and the Labor Department. There is also a chance that there will be a probe made into possible missteps regarding recommendations for customers' 401(k) plans.
The outcome of this case is going to be an interesting one to follow. Not only the issue of the settlement in the securities fraud class action litigation, but also the outcome of the criminal matters that are tied into the situation.
Source: CNN, "Wells Fargo will pay $480 million to settle securities fraud lawsuit," Matt Egan, May 04, 2018