A federal investigation into sales practices at Wells Fargo & Co. now includes the bank’s wealth-management business, extending the probe beyond the firm’s retail-banking unit where the problems originated, the Wall Street Journal reported. The Justice Department and Securities and Exchange Commission are conducting the investigation into the wealth-management business. Agents from the Federal Bureau of Investigation have been interviewing some wealth-management employees in the Phoenix area as recently as this week. Several U.S. attorney’s offices, as well as a bevy of federal and state regulators, have been investigating Wells Fargo since the fall of 2016 when the bank disclosed widespread sales-practices problems. Those included bank employees opening as many as 3.5 million accounts without customers’ knowledge or authorization. Wells Fargo has said it is cooperating with the investigations.
The U.S. Court of Appeals for the Fifth Circuit, voting 2-1, yesterday vacated the U.S. Labor Department’s fiduciary rule, the National Law Journal reported. The challengers in the Fifth Circuit case included the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute. The ruling comes one day after Labor Department won a case in the U.S. Court of Appeals for the Tenth Circuit that was brought by Market Synergy Group, an insurance distributor. The Fifth Circuit struck down the entirety of the fiduciary rule, which had expanded the definition of “fiduciary” in an attempt to confront conflicts of interest in the retirement-savings industry. Labor’s next move is to decide whether to ask the full appeals court to rehear the dispute, or take the case to the U.S. Supreme Court. The U.S. Court of Appeals for the D.C. Circuit still has an active case, one that was on hold until the Fifth Circuit ruled. The Washington, D.C., court will not be bound by how the Fifth Circuit ruled.
Investors wary of biased advice from stockbrokers can look forward to new disclosures that shine more light on the terms of their relationship, industry officials and regulators say, the Wall Street Journal reported. The disclosure is likely to be required under a regulation being written by the Securities and Exchange Commission, according to leaders of Wall Street trade groups. The SEC is close to proposing the regulation, its own version of the Labor Department’s “fiduciary rule” that required brokers handling retirement accounts to always put their clients’ interest ahead of their own financial gain. SEC Commissioner Hester Peirce cautioned that the disclosure would need to be brief and easy to understand, in contrast to the long, elaborate brochure that money managers are required to give clients.
Public companies hoping that regulators will show them a shortcut to stifling shareholder lawsuits should instead have to go through a long slog, a Democratic member of the Securities and Exchange Commission said yesterday, the Wall Street Journal reported. The SEC shouldn’t let a company doing an initial public offering restrict possible class-action lawsuits by its shareholders, Commissioner Robert Jackson Jr. told a New York investment conference. Such a move should only follow a rulemaking process through which the SEC gets public comments and studies the costs to investors of forcing disputes into private arbitration hearings, Jackson said.
Securities regulators plan to pare back Obama-era requirements that would require mutual funds to tell shareholders about large holdings of hard-to-sell assets, in what would be a significant concession to the industry, the Wall Street Journal reported. The Securities and Exchange Commission had planned to propose rolling back the disclosures, set to go into effect in 2019, on Wednesday. But it postponed the action because commissioners have splintered over the scope of the rollback. The SEC said in a notice posted yesterday that it anticipates holding a vote in the future. The SEC finished the measure toward the end of the Obama presidency, following the meltdown of a $789 million mutual fund with a high concentration of holdings in junk bonds and distressed debt. The SEC is preparing to allow funds to keep private their quarterly estimates of how much of their portfolio includes hard-to-sell debt or other securities. The data would still have to be shared with regulators.