WASHINGTON Oct 12 The U.S. Securities and
Exchange Commission raised questions about Wells Fargo & Co's
aggressive cross-selling in late 2014, according to
regulatory paperwork, almost two years before officials settled
with the bank for opening phony accounts.
In December 2014, the SEC asked Wells Fargo to detail how it
tallied the many accounts that one customer might open.
"Your cross-sell program is a key element that management
believes will help Wells Fargo meet its strategic goals," reads
the letter from Christian Windsor, an SEC attorney in the
Division of Corporation Finance.
"Please provide us with an explanation of the methodology
you use to calculate the products per household."
The same letter asks Wells Fargo to explain how it measured
cross-selling success in the past.
Wells Fargo's Controller Richard Levy responded to the
regulator on Jan. 12, 2015, saying that its methods to measure
cross-selling "remained consistent" over the past five years.
The bank wanted savings accounts, individual retirement
accounts or other products that "have the potential for revenue
generation and long-term viability," the bank wrote.
Last month, federal banking regulators ordered Wells Fargo
to pay $190 million to settle civil charges that it had opened
personal accounts without customer say-so to satisfy managers'
demand for new business.
The SEC letter makes no mention of how unauthorized accounts
might affect cross-selling metrics.
By early 2015, Wells Fargo had fired several thousand
employees for the opening of unauthorized accounts.
Federal prosecutors and other U.S. agencies are now probing
the bank, sources have said.
It is unclear exactly what prompted the SEC's Corporation
Finance Division, which reviews company filings, to ask
questions about cross-selling and whether the SEC was satisfied
with the response.
An SEC spokesman declined to comment.
Last month, several U.S. Senate Democrats called on the SEC
to investigate whether Wells Fargo misled investors by failing
to disclose what they called "widespread fraud."
In a separate letter in October 2007, the SEC asked Wells
Fargo about its formula for compensating executives. The bank
said cross-selling success could mean higher pay.
"Wells Fargo has designed its management reporting system
and goal-setting process to facilitate and reward these
behaviors," the bank wrote the SEC in October 2007.
John Stumpf, Wells Fargo's chief executive officer, was
copied on both letters. On Wednesday, Stumpf stepped down from
(Reporting By Patrick Rucker; Editing by Bernard Orr)