Monday, January 6, 2020

Indicting Corporate Officers?

A common criticism of our system of securities and banking regulation is that the regulators do not punish the executives at the large banks who create, or permit, the wrongful conduct. Of course, they will fine the same executives at a small bank, but executives at the large banks seem to get away unscathed.

Take for example Wells Fargo's phony account scandal. In September 2016,Wells Fargo agreed to pay $185 million in fines in connection with the more than two million customer accounts that had been flagged as potentially unauthorized. Wells Fargo also disclosed that it was facing investigations by the Justice Department and the Securities Exchange Commission.

Then there was no significant news on the matter for three years. except for Wells Fargo bankers and brokers who continued to lose clients because of the bank's scandals, and the firm's difficulty in recruiting brokers to join the firm.

After hints during the last two years that indictments were in the making, On Wall Street  reported this week that "[m]ultiple former high-level Wells Fargo executives are under criminal investigation in connection with the bank’s fake-account scandal and could be indicted as soon as this month."

Indictments of executives will depend on who knew what, and when they knew it. According to press reports, some executives have been forced to resign, but to our knowledge, none of lost their licenses or been indicted.


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