Under federal law, when brokers or other registered representatives leave a position with a banking institution, that company is required to notify the Financial Industry Regulator Authority (Firna) with a form that includes a field that describes why the worker was leaving. It’s those filings that lawmakers are pointing to now, claiming that Wells Fargo knew well in advance that its employees were taking part in the now infamous fake account fiasco.
Senators Elizabeth Warran (MA), Ron Wyden (OR), and Robert Menendez (NJ) sent a letter [PDF] to Wells Fargo’s new CEO Timothy Sloan claiming that the forms, known as a “U5,” show the bank had “ample information about the scope of fraudulent sales practices” long before the bank agreed to pay $185 million to resolve allegations that employees opened and closed more than two million fraudulent accounts.
The senators obtained the information by asking Firna for data on the company’s forms submitted between 2011 and 2015. This timeframe contained forms for the 5,300 employees that Wells Fargo said were fired as part of the fake account fiasco.
A Form U5 contains eight separate sections, including information on the reason for an employee’s termination and details on any related internal review, regulatory action, customer complaint, or criminal investigation.
According to Firna, slightly more than 600 of the 5,300 terminated employees had Form U5s filed. Of those forms, 207 were “specifically terminated for issues that fall within the scope of the (Consumer Financial Protection Bureau) order.”
As for the remaining 400 Firna-registered employees it was unclear if a U5 was filed at all or if it contained other reasons for the employee leaving.
Wells Fargo’s forms, according to the senators, don’t just show that Wells Fargo knew about the fraudulent activities, but that it may have used that information against employees who attempted to bring the issues to light.
“In addition,” the letter continued, “public reports indicate that Wells Fargo may have filed inaccurate or incomplete Form U5s for fired employees and that the bank may have done so to retaliate against whistleblowers. If this is the case, then it would appear that Wells Fargo concealed key information from regulators.”
A negative comment on an employee’s U5 form can make it impossible to find another job in the banking industry, the senators say.
Additionally, the lawmakers’ investigation found that Wells Fargo’s may have filed incomplete or inaccurate U5 reports for many fired employees. Specifically, the senators believe that in an unknown number of these cases, Wells Fargo may have filed U5s that did not reflect that employees were terminated for failing to meet the company’s strict sales goals.
“If Wells Fargo did not report all appropriate information on all relevant employees who were fired for misconduct – or misreported information to FINRA on employees who were fired for reporting illegal activities – then the bank may have deprived FINRA and other regulators of information that could have allowed them to uncover and stop the illegal activity at Wells Fargo well before the September 2016 CFPB settlement,” the senators wrote.
The letter asks Sloan to answer a slew of questions about the filings, including what process the company follows to file the forms and whether the company has conducted any review of the U5 forms.
A spokesperson for Wells Fargo tells the New York Times that it doesn’t tolerate retaliation.
“As we already said in two congressional hearings, Wells Fargo has been working for years to stop wrongful sales practices behavior,” a spokesperson said. “We acknowledge we could have acted sooner and more aggressively.”
by Ashlee Kieler via Consumerist