Wells Fargo has agreed to pay a $35 million civil penalty to settle charges that some of the bank’s financial advisers overcharged advisory fees. The bank has also paid affected account holders about $40 million, including interest, to reimburse them for the overcharging, the U.S. Securities and Exchange Commission has said.
The SEC said it charged Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC for overcharging more than 10,900 investment advisory accounts more than $26.8 million in advisory fees.
Wells Fargo faces allegations of overcharging clients despite advisor fee agreements
The commission claims that advisors reached agreements with clients to lower the company’s standard fees and made notes to that effect on their adviser agreements.
However, the account-processing staff at Wells Fargo did not consistently enter the reduced rate, leading clients to be billed the higher standard adviser fee.
The issue pertains to client accounts from firms that eventually merged into Wells Fargo, including AG Edwards and Wachovia.
Wells Fargo has updated its compliance protocols since the incident, and the SEC noted that it has reimbursed affected clients approximately $40 million to cover the overcharges and interest.
The firm’s spokesperson stated that the problem-causing process was corrected nearly a decade ago.
The settlement adds to Wells Fargo’s series of reputational challenges, including allegations of misconduct and the fake account scandal.
The SEC’s enforcement division director, Gurbir Grewal, emphasized that investment advisers must ensure that they honor agreements with clients, especially in an industry marked by frequent M&A activity.