Wells Fargo, the scandal-ridden American bank, is reportedly facing a new federal inquiry into its retirement plan practices.
The Labor Department is looking into whether Wells Fargo pressured participants in lower-cost corporate 401(k) accounts to roll their savings into more expensive IRA plans when they retire or leave their jobs, The Wall Street Journal reported Thursday, citing a person familiar with the probe. Investigators are also examining whether the bank encouraged savers to purchase in-house funds that would have increased its own revenue.
Under federal law, managers of these accounts are governed by fiduciary responsibilities, which means they are obligated to put their clients’ interests ahead of their own. An individual has spoken with regulators, alleging that these duties to clients were breached by the bank, the Journal reported. The Securities and Exchange Commission and Justice Department are reportedly also looking into the company’s retirement advice strategies as part of a larger investigation.
In a statement, Wells Fargo said it was “committed to thorough reviews of Wealth and Investment Management” and was “making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company.”
The company also noted that its board, “in response to inquiries from federal government agencies, is assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments or referrals of brokerage customers to the company’s investment and fiduciary services business.”
Meanwhile, last week, the Consumer Financial Protection Bureau and the Comptroller of the Currency announced that Wells Fargo had agreed to pay a $1 billion fine as part of a settlement after the bank forced an auto loan insurance program onto hundreds of thousands of consumers that did not need it and mischarged consumers for certain mortgage interest rate lock extension products.
Wells Fargo said the hefty fine, one of the largest levied on any bank unrelated to the financial crisis, will cut about $800 million off of its first-quarter profit.
The troubled bank agreed to pay a $185 million fine in 2016 after it was revealed that employees were creating fraudulent accounts for customers without their approval.
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Shares of Wells Fargo were trading more than 1% lower on Thursday, while the broader market was in the green.