Regulatory officials are giving beleaguered Wells Fargo & Co. (NYSE: WFC) even more scrutiny, this time for potentially harmful sales policies. In the latest federal probe into the scandal-plagued bank, investigators for the U.S. Department of Labor are reportedly examining Wells Fargo's approach to managing its clients' retirement funds. The San Francisco-based bank is alleged to have pushed clients in low-cost corporate 401(k) plans to roll over those funds into more expensive individual retirement accounts at Wells Fargo. The Labor Department is also investigating whether or not Wells Fargo's retirement plan services unit pushed account holders to purchase in-house funds, according to a report by the Wall Street Journal.
According to a recent regulatory filing, the U.S. government has urged Wells Fargo's board of directors to investigate the bank's 401(k) practices. In response, Wells Fargo's board is now conducting an internal review as to whether or not the bank made "inappropriate referrals or recommendations" to customers across an array of services. In its March filing, the board reported that it is examining rollovers of 401(k) plans into individual retirement accounts, as well as the bank's potentially problematic referrals of brokerage customers to Wells Fargo's investment and fiduciary services businesses.
The federal investigation into Wells Fargo's practices related to its clients' retirement savings is aimed at judging whether or not the bank is in violation of the Employee Retirement Income Security Act (ERISA). Under ERISA, the institutions that serve retirement accounts are obligated to prioritize their clients' interests over their own.
The Labor Department's new probe into Wells Fargo is the latest in a series of scandals going back to 2016 over the bank's predatory approaches to dealing with clients of a broad range of its services. News of the latest federal inquiry into Wells Fargo comes just days after the bank settled with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency in a separate investigation into Wells Fargo's mortgage and auto-lending businesses. In a statement regarding the settlement, the CFPB reported its findings on the bank's illegal practices, which included administering a mandatory auto insurance program for its auto-loan customers, and charging some consumers for mortgage interest rate-lock extensions. As part of the settlement, federal regulators have imposed a $1 billion fine on Wells Fargo for its various misdeeds.
Wells Fargo contended with a massive scandal around its employees' practice of opening fraudulent accounts after the CFPB announced that it was levying a $185 million fine on the bank for illegal activity in 2016. Later that year, the bank came under fire after it was revealed that its employees had issued unwanted life insurance policies from Prudential
