In re JOHN G. STUMPF

 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 10887 / November 13, 2020 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-20148 
 
 
In the Matter of 
 
JOHN G. STUMPF, 
 
Respondent. 
ORDER INSTITUTING CEASE-AND- 
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933, MAKING FINDINGS, AND 
IMPOSING A CEASE-AND-DESIST 
ORDER 
 
I. 
 
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- 
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 
1933 (“Securities Act”), against John G. Stumpf (“Stumpf” or “Respondent”). 
 
II. 
 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of 
Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of 
these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as to 
the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 
admitted, and except as provided herein in Section V, Respondent consents to the entry of this Order 
Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, 
Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
 
III. 
 
On the basis of this Order and Respondent’s Offer, the Commission finds
1 
that: 
 
 
1 
The findings herein are made pursuant to Respondent’s Offer of Settlement and are 
not binding on any other person or entity in this or any other proceeding. 

2 
 
 
Summary 
 
1. This proceeding relates to the actions of the former Chairman and Chief Executive 
Officer of Wells Fargo & Company (“Wells Fargo” or the “Company”), John G. Stumpf, who, in 
2015 and 2016, signed and certified misleading statements to the investing public that misstated a key 
performance metric. Stumpf and Wells Fargo publicly stated on numerous occasions that a core 
business strategy for the Company, including its largest business unit, the Community Bank, was to 
“cross sell” to customers accounts and products that they needed and used. Wells Fargo published a 
Community Bank “cross-sell metric” in its Annual Reports, and in its quarterly reports, which 
Stumpf signed and certified when they were publicly filed with the Commission. In those reports, 
Wells Fargo described the cross-sell metric as measuring the number of accounts and products sold 
– and “used” – per retail bank household. Wells Fargo characterized its cross-selling strategy to 
investors as a key component of its financial success and publicly touted the Community Bank’s 
cross-sell metric as proof of its success at executing on this core business strategy. 
 
2. In contrast to those public statements and disclosures about the purportedly “needs- 
based” selling, Wells Fargo’s Community Bank had employed a volume-based sales model that 
incentivized employees to sell to existing customers, often with little regard to actual customer need 
or expected use. By 2015, the Community Bank’s model had led to thousands of its employees 
engaging in unlawful or unethical sales misconduct, including selling a significant number of 
accounts and products that customers did not need, want, or use. 
 
3. As Wells Fargo’s Chairman and CEO during the relevant time, Stumpf was required 
to certify the accuracy of the Company’s filings with the Commission, including certifying the 
accuracy of the disclosures contained in its annual and quarterly reports filed with the Commission 
with its Forms 10-K and 10-Q. Stumpf learned of facts that put, or should have put, him on notice 
about material inaccuracies in the Company’s statements about the Community Bank’s cross-selling 
strategy as well as the cross-sell metric it reported from the second quarter of 2015 through the 
second quarter of 2016. In attesting to the accuracy of the Company’s disclosures, Stumpf’s reliance 
on several senior officers, including the head of the Community Bank, who had assured Mr. Stumpf 
that the Company’s statements related to the cross-sell strategy and metric were accurate in all material 
respects, was unreasonable. 
 
4. At that time, senior leadership at Wells Fargo, including Stumpf, learned of facts 
demonstrating the severity of the sales misconduct within the Community Bank and how it 
presented an ongoing conflict with the Company’s public statements about its core, cross-selling 
strategy.  In particular, the information about the extent of the sales misconduct rendered Wells 
Fargo’s public statements about its cross-sell strategy, and its measurement of that strategy, false 
and misleading. 
Respondent 
 
5. John G. Stumpf, age 66, was Chief Executive Officer of Wells Fargo from 2007 
until October 2016, and Chairman from 2010 until October 2016. Between December 2015 and 
August 2016, with the Company’s approval, Stumpf sold shares of Wells Fargo stock into the 
market and exercised certain of his Wells Fargo option grants to purchase shares of Wells Fargo 
securities, resulting in a net increase of his holdings of Company shares. 

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Other Relevant Entity 
 
6. Wells Fargo is a publicly-traded financial services corporation headquartered in San 
Francisco, California, and organized under the laws of the State of Delaware. Wells Fargo’s common 
stock is registered under Section 12(b) of the Securities Exchange Act of 1934 and quoted on the 
New York Stock Exchange (Ticker: WFC). Wells Fargo provides retail, commercial, and corporate 
banking services through three operating segments, the largest of which is its Community Bank. The 
Community Bank provides banking products targeted to individuals and small businesses, including 
checking and savings accounts, certificates of deposit, debit cards, bill pay, and global remittance 
products. 
 
Background 
 
Wells Fargo’s Key “Cross-Sell” Performance Metric 
 
7. In Wells Fargo’s public disclosures set out in annual and quarterly reports, and 
discussed at meetings with investors, the Company repeatedly described its sales strategy of cross- 
selling to existing customers as “needs-based.” For instance, in the second quarterly report for 2015, 
filed on Form 10-Q (on August 5, 2015) and certified by Stumpf, the Company stated: “Our cross-
sell strategy is to increase the number of products our customers use by offering them all of the 
financial products that satisfy their financial needs. Our approach is needs based as some customers 
will benefit from more products, and some may need fewer.” 
 
8. In those same disclosures, Wells Fargo published the Community Bank’s “cross- sell 
metric,” which it described as measuring the success of its cross-sell strategy. For years, through 
2014, Wells Fargo touted to investors the consistent growth of the cross-sell metric over time as 
demonstrative of its success at executing on its cross-selling strategy. Indeed, until mid- 2014, Wells 
Fargo included the cross-sell metric – typically emphasizing its growth – in earnings releases and 
earnings calls that took place shortly after the close of a quarterly financial reporting period. Stumpf 
frequently provided stock market analysts who followed Wells Fargo’s securities with information 
about the Company’s reported success in delivering on its cross-sell strategy. 
 
Attention to Sales Misconduct That Influenced the Cross-Sell Metric 
 
9. In October 2013, the Los Angeles Times reported that Wells Fargo had fired 
approximately 30 employees in the Los Angeles, California area for sales-related misconduct. The 
article quoted a Wells Fargo bank spokesperson, who confirmed the firings. In forwarding the article 
to Stumpf, the head of the Community Bank, Carrie Tolstedt (“Tolstedt”), alerted him: “This is not a good 
article.” Stumpf responded: “Not good.” The Los Angeles Times followed up with a second, longer article in 
December 2013, which detailed practices such as bankers ordering credit cards without customers’ permission, 
forging client signatures and begging their own family members to open “ghost accounts.” 
 
10. As Wells Fargo later acknowledged, the sales misconduct was widespread and 
varied. For several years, Wells Fargo bankers sold customers products and accounts that were never 
used by customers, as well as unwanted and unauthorized products, contrary to Wells Fargo’s 

4 
 
 
purportedly needs-based cross-selling strategy. The Community Bank’s onerous sales goals and 
accompanying management pressure led many of the employees to engage in the misconduct. More 
than 1,000 bankers were terminated annually for sales-related misconduct, and many more were 
disciplined for such conduct without being terminated. The employees who engaged in the 
misconduct did so repeatedly, causing a substantial number of unused or unwanted products to be 
inappropriately included in the Community Bank’s cross-sell metric. 
 
11. Shortly after the first Los Angeles Times article was published, Stumpf met with 
Tolstedt and some of her direct reports.  Together, Tolstedt and her direct reports discussed with 
Stumpf the estimated number of employees who were fired by the Community Bank for sales 
misconduct, which was approximately 1,000 or more annually, or roughly one percent of the 
number of bankers.  Based on his conversations with the Community Bank, Stumpf concluded that 
the number was not significant.  He was also told by the leaders in the Community Bank that the 
persons who had engaged in the misconduct were acting on their own and not incentivized to do so 
by the bank’s policies.  Nevertheless, based on information from other sources, Stumpf had reason 
to question those initial conclusions, as well as the ongoing effect of the Community Bank’s 
aggressive sales incentive structure and historical sales misconduct on Wells Fargo’s cross-selling 
efforts. 
 
12. In immediate response to the firings in Los Angeles and the related publicity, Wells 
Fargo’s sales of new products to existing customers slowed measurably, as bankers grew concerned 
that their conduct would be more closely scrutinized and steps were taken at the bank to curb sales 
abuse. Furthermore, over the following months, Tolstedt reported to Stumpf that, as practices were 
put in place at the bank to improve sales quality, the number of new accounts sold had slowed. She 
also reported that growth in the cross-sell metric had flattened, that she expected it would decline 
over the coming months. By the second quarter 2014, Wells Fargo reported flattened growth in the 
cross-sell metric.  By the third quarter 2014, Wells Fargo reported a decline in the Community Bank’s 
cross-sell metric for the first time.  
 
Wells Fargo’s Board Begins Seeking Answers Regarding the Sales Practices Problem 
 
13. As the Chairman of Wells Fargo’s board of directors, Stumpf worked with board 
members and board committees to facilitate the governance of the Company, including the board’s 
Risk Committee, which oversaw the risk assessment function of the Company. Stumpf considered the 
corporate risk function to be the “second line of defense” in the Company’s risk management and compliance 
efforts, which was necessary to ensure that the “first line of defense” – the Community Bank – accurately 
assessed and addressed risks and operated soundly. 
 
14. In late April 2015, the Risk Committee of the board of directors met, and during the 
meeting Tolstedt made a presentation – at the Risk Committee’s request – regarding the sales 
misconduct issues that had surfaced in the media in late 2013. The board member who chaired the 
Risk Committee was dissatisfied with the presentation by Tolstedt and, shortly after the meeting, 
contacted Stumpf and the Chief Risk Officer of the Company to voice his dissatisfaction. The Risk 
Committee chairman believed that the presentation had lacked substance and downplayed the risk to 
the bank from sales misconduct. He also sought further factual information regarding the extent of 
the problem.  

5 
 
 
 
15. On May 4, 2015, the City of Los Angeles filed a lawsuit against Wells Fargo 
alleging that the Company had engaged in unlawful sales, including opening accounts without 
customer consent. The Risk Committee chair asked that Tolstedt return to make another presentation 
on sales practices as the first order of business at the next Risk Committee meeting.  Thereafter, 
Stumpf informed Tolstedt that her next presentation at the meeting of the Risk Committee would be 
the following week, and that she should work with others to get relevant information to the committee 
members before the meeting. 
 
16. In preparation for the Risk Committee meeting, Stumpf then met with Tolstedt and 
her team. He again was advised by them that about one percent of Community Bank employees 
were terminated for misconduct each year; approximately two-thirds of such employees were 
terminated for misconduct related to the manipulation of the Company’s incentive compensation, 
including changing customer phone numbers in order to avoid unfavorable customer surveys, while the 
other one-third of such employee terminations related to sales misconduct impacting customers.  Ms. 
Tolstedt and her team also provided to Stumpf drafts of documents that had been prepared for the 
Risk Committee in response to its questions regarding the scope of the sales practices violations first 
uncovered in late 2013. Stumpf provided a critique, instructing them that the Risk Committee would 
want more supporting information. He noted: “For example, how many team members did we 
terminate for sales practice violations in the past 12 months (after implementing our changes) versus 
prior periods. What percentage of the total relevant team member population were terminated for bad 
behavior. How do/did we make sure we made customers ‘whole’ when they were impacted? How 
many products were opened in 2013, 2014, first quarter of 2015 that were done without the 
knowledge of customers? How have we changed our reward programs, incentive programs, etc. to 
reduce the likelihood [of] ‘gaming.’ What are the changes we have made to date.” 
 
17. Later the same day, Stumpf informed the chair of the Risk Committee that he had 
finished his latest review with the team and warned that the information was incredibly complex. 
Without referencing the specific numbers, Stumpf also suggested that he felt better at that point 
knowing some of the facts, such as the percentage of persons Wells Fargo terminated due to “gaming 
of the system,” and the percentage of those terminated who opened accounts that customers did not 
agree to, as opposed to persons who were terminated for interfering with the Company’s control 
mechanism to audit customer satisfaction calls. However, Stumpf did not himself provide details of 
those percentages or the numbers of terminations. In response, the chair of the Risk Committee 
replied: “I see this as a preliminary informing of the committee with anticipation that you will 
address the matter fully with us when the time is right.  Encouragement on your part to have the 
management team forthcoming and open would do wonders to keep the meeting on the right plain.”  
 
18. Though Stumpf did not attend the May 2015 Risk Committee meeting due to other 
business, he was contacted by the Committee chair shortly thereafter, who again voiced his 
dissatisfaction with the presentation. The chair, who received information during the presentation that 
understated the number of persons who were terminated for sales misconduct, nevertheless found the 
information that was presented to be alarming. He also believed that the presentation attempted to 
minimize the problems at the Community Bank.  In response, Stumpf then directed the Company’s 
Chief Risk Officer to take over responsibility from Tolstedt for addressing, scoping, and remediating 
the sales misconduct issue.  The Chief Risk Officer, at the chair of the Risk Committee’s request, 

6 
 
 
engaged an outside consulting firm to attempt to learn the scope and the cause of the sales 
misconduct.   
 
19. In early June 2015, Stumpf learned from Wells Fargo’s Chief Risk Officer that the 
bank’s primary regulator expressed concerns regarding sales practices, and Stumpf was more 
formally notified by letter later that month that the regulator considered Wells Fargo’s management 
and oversight of sales practices to be weak and in need of improvement, pointing specifically to an 
overall lack of transparency at the Community Bank regarding past investigations and ongoing 
control and monitoring. 
 
Stumpf Unreasonably Relies on Community Bank Head  
and Others in Certifying Disclosures 
 
20. On several occasions following the October 2013 Los Angeles Times article, 
Community Bank senior leadership made statements and gave assurances to the Company’s 
management, including Stumpf, that minimized the scope of the sales practices problem and led key 
gatekeepers to believe the root cause of the issue was individual misconduct rather than the sales 
model itself, and that the controls within the Community Bank were effective and reasonably 
designed to detect or prevent misconduct. Moreover, Community Bank senior leadership failed to 
fully inform Stumpf and other key gatekeepers of the significant risks that non-needs-based selling 
posed the Company. 
 
21. Stumpf failed to ascertain that the assurances he received were credible and accurate. 
 
22. For the second quarter 2015, which closed on June 30, 2015, Stumpf accepted and 
relied on sub-certifications of others, including the sub-certification provided by Tolstedt (dated 
August 5, 2015), in which she asserted that she had reviewed the draft Form 10-Q for accuracy, and 
that it did not contain any materially misleading statements or omissions. 
 
23. Wells Fargo filed its second quarter 2015 report on Form 10-Q with the 
Commission on August 5, 2015. In it, Wells Fargo stated, among other things, that its “cross-sell 
strategy” was “needs based,” and that the Community Bank’s “retail banking household cross-sell 
was 6.13 products per household in May 2015, compared with 6.17 in May 2014.” The Form 10-Q 
also incorporated by reference Wells Fargo’s lengthier disclosures about the Community Bank’s 
cross-sell metric contained in its 2014 Annual Report filed with its Form 10-K earlier in the year, 
including the claim that “For Community Banking the cross-sell metric represents the relationship of 
all retail products used by customers in retail banking households.” Stumpf signed the 2015 second 
quarterly report on Form 10-Q and also certified the accuracy of the reported disclosures and other 
information in the quarterly report. 
 
24. Wells Fargo’s second quarter 2015 report on Form 10-Q was materially false and 
misleading, as it presented the cross-sell metric of 6.13 as purportedly calculated based on the 
products “used” by households and as measuring the success of a strategy that was based on Wells 
Fargo’s customers’ “needs.” In truth, the metric was inflated by including accounts and products that 
were unauthorized, unneeded or unused. 
 

7 
 
 
25. During the following quarter, Wells Fargo’s board of directors held meetings from 
October 27-28, 2015, and the Risk Committee of the board invited the consulting firm engaged by 
the Chief Risk Officer to make a presentation regarding its review of the sales misconduct issues. 
The Risk Committee also asked Tolstedt to attend and present at the meeting on the same topic. The 
consulting firm identified and reported to Wells Fargo’s board weaknesses that needed to be 
addressed to manage the impact to the Community Bank from the sales practices risk, including the 
finding of a misalignment between the bank’s messages related to customer relationships and its sales 
goals and performance expectations applied to its bankers. Exacerbating the issue, the firm 
concluded, was that customer complaints and ethics issues were frequently not captured in Wells 
Fargo’s internal systems. The firm thus recommended, among other measures, that sales goal setting 
be reviewed and bankers be rewarded more on whether accounts were used, rather than on the 
number of products or accounts sold. 
 
26. With respect to the presentation made by Tolstedt, the Risk Committee chair again 
found the presentation to be inadequate and to have minimized the sales misconduct problems. In 
December 2015, the Risk Committee chair, another board member, and Stumpf met, and the board 
members shared their negative opinions about Tolstedt to Stumpf and recommended that Tolstedt be 
replaced as head of the Community Bank. 
 
27. Despite these growing concerns, for the third quarter 2015, which closed on 
September 30, 2015, Stumpf accepted and relied on sub-certifications of others, including the sub-
certification from Tolstedt (dated November 4, 2015), in which she asserted that she had reviewed the 
draft Form 10-Q for the quarter for accuracy and that it did not contain any materially misleading 
statements or omissions. 
 
28. Wells Fargo filed its third quarter 2015 report on Form 10-Q with the Commission 
on November 4, 2015. In it, Wells Fargo reiterated its claims that its cross-sell strategy was needs 
based, and announced that the Community Bank’s cross-sell metric was “6.13 products per 
household in August 2015, compared with 6.15 in August 2014.” Stumpf signed the 2015 third 
quarterly report on Form 10-Q and also certified the accuracy of the disclosures. 
 
29. Wells Fargo’s third quarter 2015 report on Form 10-Q was materially false and 
misleading. Like the prior quarterly report, it presented the cross-sell metric of 6.13 as purportedly 
calculated based on the products “used’ by households, and inaccurately claimed that the figure 
measured the success of a strategy based on customers’ “needs.” In truth, the metric was inflated by 
accounts and products that were the result of sales misconduct and were not needed or wanted by 
customers. 
 
30. Beginning in November 2015, Wells Fargo realigned aspects of its reporting 
structure and Tolstedt began reporting to the Chief Operating Officer, who in turn reported to 
Stumpf.  In January 2016, Tolstedt and persons who reported to her made a presentation to Stumpf 
and the COO during a quarterly Community Bank update, recommending Wells Fargo begin 
reporting a new metric for the Community Bank – “active cross-sell.” The Community Bank’s 
recommendation had been prompted, in part, by questions Stumpf had raised in 2015 about the effects 
of idle accounts. 
 

8 
 
 
31. As explained to Stumpf and others, the active cross-sell proposal would include in 
the number of products counted (the numerator in the cross-sell ratio) only those that customers 
actively used. The presentation summarized “active cross-sell” as having the ability to “capture 
actual usage.” To illustrate, the presentation used the data that had been utilized by the Community 
Bank to report the cross-sell metric from 2013 to the figure in the third quarter 2015 Form 10-Q, and 
compared the former metric with the newly-proposed metric. For the third quarter 2015, it noted: 
“Current [Cross-sell]: 6.13 Active Cross-sell 5.17.” In addition to the active cross-sell presentation, 
Tolstedt and her team described other possible changes to the Community Bank’s reported cross-sell 
metric. One such change would redefine “household,” which represented the denominator in the 
cross-sell ratio. Under the new definition, the only households that would be included in the metric 
were those that had a primary checking account. This change, on its own, would have the effect of 
shrinking the denominator and thus making the cross-sell metric a larger number.  
 
32. The Community Bank team’s presentation thus demonstrated that by restricting the 
cross-sell metric to products actually “used,” the cross-sell metric changed substantially. Tolstedt and 
her team further suggested that, unlike the then-reported cross sell metric that included inactive 
accounts, the “active cross-sell” metric would likely show growth much sooner. The team’s 
presentation was positively received, including by Stumpf and the COO. 
 
33. The Community Bank team further explained that the “active cross-sell” metric 
potentially could be readied for public presentation during Wells Fargo’s 2016 Investor Day 
conference, scheduled for May 2016. The Investor Day conference was an important, day-long event 
hosted by Wells Fargo every other year. It was attended by numerous large investors and by 
securities industry analysts who followed Wells Fargo’s stock closely and who wrote about Wells 
Fargo in their communications with their own investor clients. The highest levels of management at 
Wells Fargo, including Stumpf, the COO, the Chief Financial Officer, and the heads of the business 
segments, such as the Community Bank, attended and provided details about business strategies. 
 
34. Soon after the January 2016 presentation by the Community Bank on “active cross- 
sell,” Wells Fargo began to prepare its 2015 Annual Report to be filed with the Commission with its 
Form 10-K for the year ended December 31, 2015. The drafts of the Annual Report, which were 
provided to Stumpf and to Tolstedt who, along with others, provided her sub-certifications as to its 
accuracy, used the cross-sell metric that was inflated by “inactive” accounts. 
 
35. In Wells Fargo’s 2015 Annual Report, filed with the Commission with the 2015 
Form 10-K on February 24, 2016, the Company reiterated that its cross-sell strategy was to “offer[] 
customers the products and services they need, want and value” and that its “approach to cross-sell is 
needs-based.” Wells Fargo further stated: “One way we track the degree to which we are satisfying 
our customers’ financial needs is through our cross-sell metrics.” The 2015 Annual Report also 
stated: “For Community Banking the cross-sell metric represents the relationship of all retail 
products used by customers in retail banking households.” Wells Fargo further reported that its 
Community Bank’s “retail banking household cross-sell was 6.11 products per household in 
November 2015, compared with 6.17 in November 2014 and 6.16 in November 2013.” Stumpf 
signed the 2015 Form 10-K filed with the Annual Report, and he certified the accuracy of the 
reported disclosures and other related information contained in the report. 
 

9 
 
 
36. Wells Fargo’s 2015 Annual Report filed with its Form 10-K was materially false 
and misleading. It presented the cross-sell metric of 6.11 per household as purportedly measuring 
“retail products used by customers in retail banking households” and as reflective of a “needs- based” 
cross-sell approach. In reality, by the Community Bank’s own measure, the reported cross- sell metric 
included products that were not used by customers – as much as 18 percent compared with products 
and accounts actively used. Instead, the reported cross-sell metric was inflated by accounts and 
products that were the result of sales misconduct and were not needed, wanted, or used by customers. 
 
37. From March through May 2016, the Community Bank team continued to refine the 
new “active cross-sell” metric, which they considered announcing during the 2016 Investor Day 
conference, and spoke internally with numerous persons at Wells Fargo, including from the finance 
department, the legal department, and media relations. 
 
38. However, in May 2016, shortly before the Investor Day conference, the Community 
Bank removed the “active cross-sell” discussion from the prepared presentation for the conference. 
At approximately the same time, on May 4, 2016, Wells Fargo filed with the Commission its first 
quarterly 2016 report on Form 10-Q (for the period ended March 30, 2016), which Stumpf signed 
and certified, having received a sub-certification from Tolstedt and others as to the accuracy of the 
information regarding the Community Bank. In it, Wells Fargo again misleadingly described its 
cross-sell strategy as “needs-based” and reported the Community Bank cross-sell metric “was 6.09 
products per household in February 2016, compared with 6.13 in February 2015.” 
 
39. Wells Fargo’s first quarter 2016 report on Form 10-Q was materially false and 
misleading, as it presented the cross-sell metric of 6.09 as purportedly calculated based on the 
products “used’ by households and as measuring the success of a strategy that was based on Wells 
Fargo’s customers’ “needs.” In truth, the metric was inflated by accounts and products that were the 
result of sales misconduct and were not needed, wanted, or used by customers. 
 
40. During the May 24, 2016 Investor Day conference, Stumpf, Tolstedt, and several 
other senior officers spoke.  Tolstedt responded to questions about the Community Bank’s declining 
cross-sell metric. One analyst who followed Wells Fargo’s stock observed that the decline in the 
metric was “a bit of a change” for the Community Bank and asked whether the decline reflected 
either “an inevitable saturation” or “a need for new products.” In response, Tolstedt acknowledged 
that there had been “headwinds.” However, she attributed the decline in the cross-sell metric to 
strong checking account growth, and “the interest rate environment.” Tolstedt did not mention that 
the reported metric continued to decline as “inactive” accounts – that is, unused products, unwanted 
products, and unauthorized products that were the result of sales misconduct – slowly rolled off the 
metric. 
 
41. On July 12, 2016, Wells Fargo announced that Tolstedt was retiring at the year’s 
end, and would leave her position as head of the Community Bank as of July 31, 2016. Wells 
Fargo’s public announcement was also filed with the Commission on Form 8-K. Nevertheless, on 
August 4, 2016, Wells Fargo filed with the Commission its second quarterly 2016 report on Form 
10-Q (for the quarter ended June 30, 2016), which Stumpf signed and certified, having received  sub-
certifications from Tolstedt and others as to the accuracy of the information regarding the 
Community Bank. In it, Wells Fargo maintained that its cross-sell strategy was “needs-based,” but 

10 
 
 
disclosed a change in the cross-sell metric by including in the ratio a new definition of “households” 
that was limited to those that maintain a retail checking account. In other words, Wells Fargo made 
the first one of the changes that the Community Bank had proposed in January 2016 to the cross-sell 
metric, which had the effect of reporting a higher value for the cross-sell metric: “Our Community 
Banking cross-sell metrics, as revised for prior periods to conform to the current period presentation, 
were 6.28, 6.32, 6.31, 6.37 and 6.36 as of February 2016, May 2015 and November 2015, 2014 and 
2013, respectively.” No mention was made of the “active cross-sell” metric. 
 
42. Wells Fargo’s second quarter 2016 report on Form 10-Q was materially false and 
misleading, as it presented the cross-sell metric as purportedly measuring the success of a strategy that 
was based on its customers’ “needs.” In truth, the metric remained inflated by accounts and products 
that were the results of sales misconduct and that were not needed, wanted, or used by customers. 
 
43. On September 8, 2016, three settlements with Wells Fargo were announced, each 
related to allegations of sales misconduct by bankers. First, the Consumer Financial Protection 
Bureau fined Wells Fargo $100 million for unlawfully opening more than two million deposit and 
credit card accounts that may not have been authorized by consumers. Second, Wells Fargo agreed to 
pay an additional $35 million penalty to the Office of the Comptroller of the Currency, the bank’s 
principal regulator, in an action also alleging sales misconduct by bankers. Third, Wells Fargo 
agreed to settle the lawsuit brought by the City of Los Angeles by paying $50 million for similarly-
described conduct. 
 
44. Shortly after the announced settlements, on September 27, 2016, the independent 
directors of Wells Fargo’s board of directors announced that the Company had launched an 
investigation into the Company’s retail banking sales practices, and that it would take certain 
personnel actions relating to Stumpf and Tolstedt. The independent directors agreed with Stumpf that 
he would forfeit all of his outstanding unvested equity awards, valued at approximately $41 million 
and that he also would not receive a bonus for 2016. In April 2017, the board additionally 
retroactively clawed back approximately $28 million in previous equity awards from Stumpf. 
 
45. On October 12, 2016, Wells Fargo announced the retirement of Stumpf from the 
Company, which included his position as CEO and as a member of the board of directors. 
 
Violations 
 
46. A statement or omission is material if there is a substantial likelihood that a 
reasonable investor would consider it important in making an investment decision. Basic Inc. v. 
Levinson, 485 U.S. 224, 231-32 (1988). 
 
47. As a result of the conduct described above, Stumpf violated Section 17(a)(2) of the 
Securities Act, which proscribes obtaining money or property through misstatements or omissions 
about material facts, and Section 17(a)(3) of the Securities Act, which proscribes any transaction or 
course of business that operates or would operate as a fraud or deceit upon a purchaser of 
securities.  A violation of these provisions does not require scienter and may rest on a finding of 
negligence.  See Aaron v. SEC, 446 U.S. 680, 685, 701-02 (1980). 
 

11 
 
 
Respondent’s Remedial Efforts 
 
48. In determining to accept Stumpf’s Offer, the Commission considered remedial acts 
undertaken by him and cooperation afforded the Commission staff. 
 
IV. 
 
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed 
to in Respondent Stumpf’s Offer. 
 
Accordingly, it is hereby ORDERED that: 
 
A. Pursuant to Section 8A of the Securities Act, Respondent Stumpf cease and desist 
from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) 
of the Securities Act. 
 
B. Respondent shall, within 30 days of the entry of this Order, pay a civil money penalty 
in the amount of $2,500,000.00 to the Securities and Exchange Commission.  If timely payment is not 
made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  
  
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request; 
  
(2)          Respondent may make direct payment from a bank account via Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
  
(3)          Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed 
to: 
  
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
  
Payments by check or money order must be accompanied by a cover letter identifying John G. Stumpf 
as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover 
letter and check or money order must be sent to Monique C. Winkler, Associate Regional Director, 
Division of Enforcement, Securities and Exchange Commission, 44 Montgomery Street, Suite 2800, 
San Francisco, CA 94104. 
 
C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 
for the penalties referenced in paragraph IV.B above. This Fair Fund shall be added to or combined 
with the Fair Fund established in the related administrative proceeding in In the Matter of Wells Fargo 
& Company, Administrative Proceeding File No. 3-19704 (Feb. 21, 2020).  Amounts ordered to be 

12 
 
 
paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government 
for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, 
Respondent agrees that in any Related Investor Action, he shall not argue that he is entitled to, nor 
shall he benefit by, offset or reduction of any award of compensatory damages by the amount of any 
part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”). If the court in any 
Related Investor Action grants such a Penalty Offset, Respondent agrees that he shall, within 30 days 
after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in this action 
and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment 
shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the 
civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” 
means a private damages action brought against Respondent by or on behalf of one or more investors 
based on substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
V. 
 
It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 523 of 
the Bankruptcy Code, 11 U.S.C. § 523, the findings in this Order are true and admitted by 
Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 
amounts due by Respondent under this Order or any other judgment, order, consent order, decree or 
settlement agreement entered in connection with this proceeding, is a debt for the violation by 
Respondent of the federal securities laws or any regulation or order issued under such laws, as set 
forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19). 
 
By the Commission. 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 10887 / November 13, 2020 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-20148 

 

 

In the Matter of 

 

JOHN G. STUMPF, 

 

Respondent. 

ORDER INSTITUTING CEASE-AND- 

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933, MAKING FINDINGS, AND 

IMPOSING A CEASE-AND-DESIST 

ORDER 

 

I. 

 

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- 

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 

1933 (“Securities Act”), against John G. Stumpf (“Stumpf” or “Respondent”). 

 

II. 

 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of 

Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of 

these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as to 

the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 

admitted, and except as provided herein in Section V, Respondent consents to the entry of this Order 

Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, 

Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 

 

III. 
 

On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 
 
 

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are 

not binding on any other person or entity in this or any other proceeding. 



2   

Summary 

 

1. This proceeding relates to the actions of the former Chairman and Chief Executive 

Officer of Wells Fargo & Company (“Wells Fargo” or the “Company”), John G. Stumpf, who, in 

2015 and 2016, signed and certified misleading statements to the investing public that misstated a key 

performance metric. Stumpf and Wells Fargo publicly stated on numerous occasions that a core 

business strategy for the Company, including its largest business unit, the Community Bank, was to 

“cross sell” to customers accounts and products that they needed and used. Wells Fargo published a 

Community Bank “cross-sell metric” in its Annual Reports, and in its quarterly reports, which 

Stumpf signed and certified when they were publicly filed with the Commission. In those reports, 

Wells Fargo described the cross-sell metric as measuring the number of accounts and products sold 

– and “used” – per retail bank household. Wells Fargo characterized its cross-selling strategy to 

investors as a key component of its financial success and publicly touted the Community Bank’s 

cross-sell metric as proof of its success at executing on this core business strategy. 

 

2. In contrast to those public statements and disclosures about the purportedly “needs- 

based” selling, Wells Fargo’s Community Bank had employed a volume-based sales model that 

incentivized employees to sell to existing customers, often with little regard to actual customer need 

or expected use. By 2015, the Community Bank’s model had led to thousands of its employees 

engaging in unlawful or unethical sales misconduct, including selling a significant number of 

accounts and products that customers did not need, want, or use. 
 

3. As Wells Fargo’s Chairman and CEO during the relevant time, Stumpf was required 

to certify the accuracy of the Company’s filings with the Commission, including certifying the 

accuracy of the disclosures contained in its annual and quarterly reports filed with the Commission 

with its Forms 10-K and 10-Q. Stumpf learned of facts that put, or should have put, him on notice 

about material inaccuracies in the Company’s statements about the Community Bank’s cross-selling 

strategy as well as the cross-sell metric it reported from the second quarter of 2015 through the 

second quarter of 2016. In attesting to the accuracy of the Company’s disclosures, Stumpf’s reliance 

on several senior officers, including the head of the Community Bank, who had assured Mr. Stumpf 

that the Company’s statements related to the cross-sell strategy and metric were accurate in all material 

respects, was unreasonable. 

 

4. At that time, senior leadership at Wells Fargo, including Stumpf, learned of facts 

demonstrating the severity of the sales misconduct within the Community Bank and how it 

presented an ongoing conflict with the Company’s public statements about its core, cross-selling 

strategy.  In particular, the information about the extent of the sales misconduct rendered Wells 

Fargo’s public statements about its cross-sell strategy, and its measurement of that strategy, false 

and misleading. 

Respondent 

 

5. John G. Stumpf, age 66, was Chief Executive Officer of Wells Fargo from 2007 

until October 2016, and Chairman from 2010 until October 2016. Between December 2015 and 

August 2016, with the Company’s approval, Stumpf sold shares of Wells Fargo stock into the 

market and exercised certain of his Wells Fargo option grants to purchase shares of Wells Fargo 

securities, resulting in a net increase of his holdings of Company shares. 



3   

 

Other Relevant Entity 

 

6. Wells Fargo is a publicly-traded financial services corporation headquartered in San 

Francisco, California, and organized under the laws of the State of Delaware. Wells Fargo’s common 

stock is registered under Section 12(b) of the Securities Exchange Act of 1934 and quoted on the 

New York Stock Exchange (Ticker: WFC). Wells Fargo provides retail, commercial, and corporate 

banking services through three operating segments, the largest of which is its Community Bank. The 

Community Bank provides banking products targeted to individuals and small businesses, including 

checking and savings accounts, certificates of deposit, debit cards, bill pay, and global remittance 

products. 

 

Background 

 

Wells Fargo’s Key “Cross-Sell” Performance Metric 

 

7. In Wells Fargo’s public disclosures set out in annual and quarterly reports, and 

discussed at meetings with investors, the Company repeatedly described its sales strategy of cross- 

selling to existing customers as “needs-based.” For instance, in the second quarterly report for 2015, 

filed on Form 10-Q (on August 5, 2015) and certified by Stumpf, the Company stated: “Our cross-

sell strategy is to increase the number of products our customers use by offering them all of the 

financial products that satisfy their financial needs. Our approach is needs based as some customers 

will benefit from more products, and some may need fewer.” 

 

8. In those same disclosures, Wells Fargo published the Community Bank’s “cross- sell 

metric,” which it described as measuring the success of its cross-sell strategy. For years, through 

2014, Wells Fargo touted to investors the consistent growth of the cross-sell metric over time as 

demonstrative of its success at executing on its cross-selling strategy. Indeed, until mid- 2014, Wells 

Fargo included the cross-sell metric – typically emphasizing its growth – in earnings releases and 

earnings calls that took place shortly after the close of a quarterly financial reporting period. Stumpf 

frequently provided stock market analysts who followed Wells Fargo’s securities with information 

about the Company’s reported success in delivering on its cross-sell strategy. 

 

Attention to Sales Misconduct That Influenced the Cross-Sell Metric 

 

9. In October 2013, the Los Angeles Times reported that Wells Fargo had fired 

approximately 30 employees in the Los Angeles, California area for sales-related misconduct. The 

article quoted a Wells Fargo bank spokesperson, who confirmed the firings. In forwarding the article 

to Stumpf, the head of the Community Bank, Carrie Tolstedt (“Tolstedt”), alerted him: “This is not a good 

article.” Stumpf responded: “Not good.” The Los Angeles Times followed up with a second, longer article in 

December 2013, which detailed practices such as bankers ordering credit cards without customers’ permission, 
forging client signatures and begging their own family members to open “ghost accounts.” 

 

10. As Wells Fargo later acknowledged, the sales misconduct was widespread and 

varied. For several years, Wells Fargo bankers sold customers products and accounts that were never 

used by customers, as well as unwanted and unauthorized products, contrary to Wells Fargo’s 



4   

purportedly needs-based cross-selling strategy. The Community Bank’s onerous sales goals and 

accompanying management pressure led many of the employees to engage in the misconduct. More 

than 1,000 bankers were terminated annually for sales-related misconduct, and many more were 

disciplined for such conduct without being terminated. The employees who engaged in the 

misconduct did so repeatedly, causing a substantial number of unused or unwanted products to be 

inappropriately included in the Community Bank’s cross-sell metric. 

 

11. Shortly after the first Los Angeles Times article was published, Stumpf met with 

Tolstedt and some of her direct reports.  Together, Tolstedt and her direct reports discussed with 

Stumpf the estimated number of employees who were fired by the Community Bank for sales 

misconduct, which was approximately 1,000 or more annually, or roughly one percent of the 

number of bankers.  Based on his conversations with the Community Bank, Stumpf concluded that 

the number was not significant.  He was also told by the leaders in the Community Bank that the 

persons who had engaged in the misconduct were acting on their own and not incentivized to do so 

by the bank’s policies.  Nevertheless, based on information from other sources, Stumpf had reason 

to question those initial conclusions, as well as the ongoing effect of the Community Bank’s 

aggressive sales incentive structure and historical sales misconduct on Wells Fargo’s cross-selling 

efforts. 

 

12. In immediate response to the firings in Los Angeles and the related publicity, Wells 

Fargo’s sales of new products to existing customers slowed measurably, as bankers grew concerned 

that their conduct would be more closely scrutinized and steps were taken at the bank to curb sales 

abuse. Furthermore, over the following months, Tolstedt reported to Stumpf that, as practices were 

put in place at the bank to improve sales quality, the number of new accounts sold had slowed. She 

also reported that growth in the cross-sell metric had flattened, that she expected it would decline 

over the coming months. By the second quarter 2014, Wells Fargo reported flattened growth in the 

cross-sell metric.  By the third quarter 2014, Wells Fargo reported a decline in the Community Bank’s 

cross-sell metric for the first time.  

 

Wells Fargo’s Board Begins Seeking Answers Regarding the Sales Practices Problem 

 

13. As the Chairman of Wells Fargo’s board of directors, Stumpf worked with board 

members and board committees to facilitate the governance of the Company, including the board’s 
Risk Committee, which oversaw the risk assessment function of the Company. Stumpf considered the 

corporate risk function to be the “second line of defense” in the Company’s risk management and compliance 
efforts, which was necessary to ensure that the “first line of defense” – the Community Bank – accurately 

assessed and addressed risks and operated soundly. 

 

14. In late April 2015, the Risk Committee of the board of directors met, and during the 

meeting Tolstedt made a presentation – at the Risk Committee’s request – regarding the sales 

misconduct issues that had surfaced in the media in late 2013. The board member who chaired the 

Risk Committee was dissatisfied with the presentation by Tolstedt and, shortly after the meeting, 

contacted Stumpf and the Chief Risk Officer of the Company to voice his dissatisfaction. The Risk 

Committee chairman believed that the presentation had lacked substance and downplayed the risk to 

the bank from sales misconduct. He also sought further factual information regarding the extent of 

the problem.  



5   

 

15. On May 4, 2015, the City of Los Angeles filed a lawsuit against Wells Fargo 

alleging that the Company had engaged in unlawful sales, including opening accounts without 

customer consent. The Risk Committee chair asked that Tolstedt return to make another presentation 

on sales practices as the first order of business at the next Risk Committee meeting.  Thereafter, 

Stumpf informed Tolstedt that her next presentation at the meeting of the Risk Committee would be 

the following week, and that she should work with others to get relevant information to the committee 

members before the meeting. 

 

16. In preparation for the Risk Committee meeting, Stumpf then met with Tolstedt and 

her team. He again was advised by them that about one percent of Community Bank employees 

were terminated for misconduct each year; approximately two-thirds of such employees were 

terminated for misconduct related to the manipulation of the Company’s incentive compensation, 

including changing customer phone numbers in order to avoid unfavorable customer surveys, while the 

other one-third of such employee terminations related to sales misconduct impacting customers.  Ms. 

Tolstedt and her team also provided to Stumpf drafts of documents that had been prepared for the 

Risk Committee in response to its questions regarding the scope of the sales practices violations first 

uncovered in late 2013. Stumpf provided a critique, instructing them that the Risk Committee would 

want more supporting information. He noted: “For example, how many team members did we 

terminate for sales practice violations in the past 12 months (after implementing our changes) versus 

prior periods. What percentage of the total relevant team member population were terminated for bad 

behavior. How do/did we make sure we made customers ‘whole’ when they were impacted? How 

many products were opened in 2013, 2014, first quarter of 2015 that were done without the 

knowledge of customers? How have we changed our reward programs, incentive programs, etc. to 

reduce the likelihood [of] ‘gaming.’ What are the changes we have made to date.” 

 

17. Later the same day, Stumpf informed the chair of the Risk Committee that he had 

finished his latest review with the team and warned that the information was incredibly complex. 

Without referencing the specific numbers, Stumpf also suggested that he felt better at that point 

knowing some of the facts, such as the percentage of persons Wells Fargo terminated due to “gaming 

of the system,” and the percentage of those terminated who opened accounts that customers did not 

agree to, as opposed to persons who were terminated for interfering with the Company’s control 

mechanism to audit customer satisfaction calls. However, Stumpf did not himself provide details of 

those percentages or the numbers of terminations. In response, the chair of the Risk Committee 

replied: “I see this as a preliminary informing of the committee with anticipation that you will 

address the matter fully with us when the time is right.  Encouragement on your part to have the 

management team forthcoming and open would do wonders to keep the meeting on the right plain.”  

 

18. Though Stumpf did not attend the May 2015 Risk Committee meeting due to other 

business, he was contacted by the Committee chair shortly thereafter, who again voiced his 

dissatisfaction with the presentation. The chair, who received information during the presentation that 

understated the number of persons who were terminated for sales misconduct, nevertheless found the 

information that was presented to be alarming. He also believed that the presentation attempted to 

minimize the problems at the Community Bank.  In response, Stumpf then directed the Company’s 

Chief Risk Officer to take over responsibility from Tolstedt for addressing, scoping, and remediating 

the sales misconduct issue.  The Chief Risk Officer, at the chair of the Risk Committee’s request, 



6   

engaged an outside consulting firm to attempt to learn the scope and the cause of the sales 

misconduct.   

 

19. In early June 2015, Stumpf learned from Wells Fargo’s Chief Risk Officer that the 

bank’s primary regulator expressed concerns regarding sales practices, and Stumpf was more 

formally notified by letter later that month that the regulator considered Wells Fargo’s management 

and oversight of sales practices to be weak and in need of improvement, pointing specifically to an 

overall lack of transparency at the Community Bank regarding past investigations and ongoing 

control and monitoring. 

 

Stumpf Unreasonably Relies on Community Bank Head  

and Others in Certifying Disclosures 

 

20. On several occasions following the October 2013 Los Angeles Times article, 

Community Bank senior leadership made statements and gave assurances to the Company’s 

management, including Stumpf, that minimized the scope of the sales practices problem and led key 

gatekeepers to believe the root cause of the issue was individual misconduct rather than the sales 

model itself, and that the controls within the Community Bank were effective and reasonably 

designed to detect or prevent misconduct. Moreover, Community Bank senior leadership failed to 

fully inform Stumpf and other key gatekeepers of the significant risks that non-needs-based selling 

posed the Company. 

 

21. Stumpf failed to ascertain that the assurances he received were credible and accurate. 

 

22. For the second quarter 2015, which closed on June 30, 2015, Stumpf accepted and 

relied on sub-certifications of others, including the sub-certification provided by Tolstedt (dated 

August 5, 2015), in which she asserted that she had reviewed the draft Form 10-Q for accuracy, and 

that it did not contain any materially misleading statements or omissions. 

 

23. Wells Fargo filed its second quarter 2015 report on Form 10-Q with the 

Commission on August 5, 2015. In it, Wells Fargo stated, among other things, that its “cross-sell 

strategy” was “needs based,” and that the Community Bank’s “retail banking household cross-sell 

was 6.13 products per household in May 2015, compared with 6.17 in May 2014.” The Form 10-Q 

also incorporated by reference Wells Fargo’s lengthier disclosures about the Community Bank’s 

cross-sell metric contained in its 2014 Annual Report filed with its Form 10-K earlier in the year, 

including the claim that “For Community Banking the cross-sell metric represents the relationship of 

all retail products used by customers in retail banking households.” Stumpf signed the 2015 second 

quarterly report on Form 10-Q and also certified the accuracy of the reported disclosures and other 

information in the quarterly report. 

 

24. Wells Fargo’s second quarter 2015 report on Form 10-Q was materially false and 

misleading, as it presented the cross-sell metric of 6.13 as purportedly calculated based on the 

products “used” by households and as measuring the success of a strategy that was based on Wells 

Fargo’s customers’ “needs.” In truth, the metric was inflated by including accounts and products that 

were unauthorized, unneeded or unused. 

 



7   

25. During the following quarter, Wells Fargo’s board of directors held meetings from 

October 27-28, 2015, and the Risk Committee of the board invited the consulting firm engaged by 

the Chief Risk Officer to make a presentation regarding its review of the sales misconduct issues. 

The Risk Committee also asked Tolstedt to attend and present at the meeting on the same topic. The 

consulting firm identified and reported to Wells Fargo’s board weaknesses that needed to be 

addressed to manage the impact to the Community Bank from the sales practices risk, including the 

finding of a misalignment between the bank’s messages related to customer relationships and its sales 

goals and performance expectations applied to its bankers. Exacerbating the issue, the firm 

concluded, was that customer complaints and ethics issues were frequently not captured in Wells 

Fargo’s internal systems. The firm thus recommended, among other measures, that sales goal setting 

be reviewed and bankers be rewarded more on whether accounts were used, rather than on the 

number of products or accounts sold. 

 

26. With respect to the presentation made by Tolstedt, the Risk Committee chair again 

found the presentation to be inadequate and to have minimized the sales misconduct problems. In 

December 2015, the Risk Committee chair, another board member, and Stumpf met, and the board 

members shared their negative opinions about Tolstedt to Stumpf and recommended that Tolstedt be 

replaced as head of the Community Bank. 

 

27. Despite these growing concerns, for the third quarter 2015, which closed on 

September 30, 2015, Stumpf accepted and relied on sub-certifications of others, including the sub-

certification from Tolstedt (dated November 4, 2015), in which she asserted that she had reviewed the 

draft Form 10-Q for the quarter for accuracy and that it did not contain any materially misleading 

statements or omissions. 

 

28. Wells Fargo filed its third quarter 2015 report on Form 10-Q with the Commission 

on November 4, 2015. In it, Wells Fargo reiterated its claims that its cross-sell strategy was needs 

based, and announced that the Community Bank’s cross-sell metric was “6.13 products per 

household in August 2015, compared with 6.15 in August 2014.” Stumpf signed the 2015 third 

quarterly report on Form 10-Q and also certified the accuracy of the disclosures. 

 

29. Wells Fargo’s third quarter 2015 report on Form 10-Q was materially false and 

misleading. Like the prior quarterly report, it presented the cross-sell metric of 6.13 as purportedly 

calculated based on the products “used’ by households, and inaccurately claimed that the figure 

measured the success of a strategy based on customers’ “needs.” In truth, the metric was inflated by 

accounts and products that were the result of sales misconduct and were not needed or wanted by 

customers. 

 

30. Beginning in November 2015, Wells Fargo realigned aspects of its reporting 

structure and Tolstedt began reporting to the Chief Operating Officer, who in turn reported to 

Stumpf.  In January 2016, Tolstedt and persons who reported to her made a presentation to Stumpf 

and the COO during a quarterly Community Bank update, recommending Wells Fargo begin 

reporting a new metric for the Community Bank – “active cross-sell.” The Community Bank’s 

recommendation had been prompted, in part, by questions Stumpf had raised in 2015 about the effects 

of idle accounts. 

 



8   

31. As explained to Stumpf and others, the active cross-sell proposal would include in 

the number of products counted (the numerator in the cross-sell ratio) only those that customers 

actively used. The presentation summarized “active cross-sell” as having the ability to “capture 

actual usage.” To illustrate, the presentation used the data that had been utilized by the Community 

Bank to report the cross-sell metric from 2013 to the figure in the third quarter 2015 Form 10-Q, and 

compared the former metric with the newly-proposed metric. For the third quarter 2015, it noted: 

“Current [Cross-sell]: 6.13 Active Cross-sell 5.17.” In addition to the active cross-sell presentation, 

Tolstedt and her team described other possible changes to the Community Bank’s reported cross-sell 

metric. One such change would redefine “household,” which represented the denominator in the 

cross-sell ratio. Under the new definition, the only households that would be included in the metric 

were those that had a primary checking account. This change, on its own, would have the effect of 

shrinking the denominator and thus making the cross-sell metric a larger number.  

 

32. The Community Bank team’s presentation thus demonstrated that by restricting the 

cross-sell metric to products actually “used,” the cross-sell metric changed substantially. Tolstedt and 

her team further suggested that, unlike the then-reported cross sell metric that included inactive 

accounts, the “active cross-sell” metric would likely show growth much sooner. The team’s 

presentation was positively received, including by Stumpf and the COO. 

 

33. The Community Bank team further explained that the “active cross-sell” metric 

potentially could be readied for public presentation during Wells Fargo’s 2016 Investor Day 

conference, scheduled for May 2016. The Investor Day conference was an important, day-long event 

hosted by Wells Fargo every other year. It was attended by numerous large investors and by 

securities industry analysts who followed Wells Fargo’s stock closely and who wrote about Wells 

Fargo in their communications with their own investor clients. The highest levels of management at 

Wells Fargo, including Stumpf, the COO, the Chief Financial Officer, and the heads of the business 

segments, such as the Community Bank, attended and provided details about business strategies. 

 

34. Soon after the January 2016 presentation by the Community Bank on “active cross- 

sell,” Wells Fargo began to prepare its 2015 Annual Report to be filed with the Commission with its 

Form 10-K for the year ended December 31, 2015. The drafts of the Annual Report, which were 

provided to Stumpf and to Tolstedt who, along with others, provided her sub-certifications as to its 

accuracy, used the cross-sell metric that was inflated by “inactive” accounts. 

 

35. In Wells Fargo’s 2015 Annual Report, filed with the Commission with the 2015 

Form 10-K on February 24, 2016, the Company reiterated that its cross-sell strategy was to “offer[] 

customers the products and services they need, want and value” and that its “approach to cross-sell is 

needs-based.” Wells Fargo further stated: “One way we track the degree to which we are satisfying 

our customers’ financial needs is through our cross-sell metrics.” The 2015 Annual Report also 

stated: “For Community Banking the cross-sell metric represents the relationship of all retail 

products used by customers in retail banking households.” Wells Fargo further reported that its 

Community Bank’s “retail banking household cross-sell was 6.11 products per household in 

November 2015, compared with 6.17 in November 2014 and 6.16 in November 2013.” Stumpf 

signed the 2015 Form 10-K filed with the Annual Report, and he certified the accuracy of the 

reported disclosures and other related information contained in the report. 

 



9   

36. Wells Fargo’s 2015 Annual Report filed with its Form 10-K was materially false 

and misleading. It presented the cross-sell metric of 6.11 per household as purportedly measuring 

“retail products used by customers in retail banking households” and as reflective of a “needs- based” 

cross-sell approach. In reality, by the Community Bank’s own measure, the reported cross- sell metric 

included products that were not used by customers – as much as 18 percent compared with products 

and accounts actively used. Instead, the reported cross-sell metric was inflated by accounts and 

products that were the result of sales misconduct and were not needed, wanted, or used by customers. 

 

37. From March through May 2016, the Community Bank team continued to refine the 

new “active cross-sell” metric, which they considered announcing during the 2016 Investor Day 

conference, and spoke internally with numerous persons at Wells Fargo, including from the finance 

department, the legal department, and media relations. 

 

38. However, in May 2016, shortly before the Investor Day conference, the Community 

Bank removed the “active cross-sell” discussion from the prepared presentation for the conference. 

At approximately the same time, on May 4, 2016, Wells Fargo filed with the Commission its first 

quarterly 2016 report on Form 10-Q (for the period ended March 30, 2016), which Stumpf signed 

and certified, having received a sub-certification from Tolstedt and others as to the accuracy of the 

information regarding the Community Bank. In it, Wells Fargo again misleadingly described its 

cross-sell strategy as “needs-based” and reported the Community Bank cross-sell metric “was 6.09 

products per household in February 2016, compared with 6.13 in February 2015.” 

 

39. Wells Fargo’s first quarter 2016 report on Form 10-Q was materially false and 

misleading, as it presented the cross-sell metric of 6.09 as purportedly calculated based on the 

products “used’ by households and as measuring the success of a strategy that was based on Wells 

Fargo’s customers’ “needs.” In truth, the metric was inflated by accounts and products that were the 

result of sales misconduct and were not needed, wanted, or used by customers. 

 

40. During the May 24, 2016 Investor Day conference, Stumpf, Tolstedt, and several 

other senior officers spoke.  Tolstedt responded to questions about the Community Bank’s declining 

cross-sell metric. One analyst who followed Wells Fargo’s stock observed that the decline in the 

metric was “a bit of a change” for the Community Bank and asked whether the decline reflected 

either “an inevitable saturation” or “a need for new products.” In response, Tolstedt acknowledged 

that there had been “headwinds.” However, she attributed the decline in the cross-sell metric to 

strong checking account growth, and “the interest rate environment.” Tolstedt did not mention that 

the reported metric continued to decline as “inactive” accounts – that is, unused products, unwanted 

products, and unauthorized products that were the result of sales misconduct – slowly rolled off the 

metric. 

 

41. On July 12, 2016, Wells Fargo announced that Tolstedt was retiring at the year’s 

end, and would leave her position as head of the Community Bank as of July 31, 2016. Wells 

Fargo’s public announcement was also filed with the Commission on Form 8-K. Nevertheless, on 

August 4, 2016, Wells Fargo filed with the Commission its second quarterly 2016 report on Form 

10-Q (for the quarter ended June 30, 2016), which Stumpf signed and certified, having received  sub-

certifications from Tolstedt and others as to the accuracy of the information regarding the 

Community Bank. In it, Wells Fargo maintained that its cross-sell strategy was “needs-based,” but 



10   

disclosed a change in the cross-sell metric by including in the ratio a new definition of “households” 

that was limited to those that maintain a retail checking account. In other words, Wells Fargo made 

the first one of the changes that the Community Bank had proposed in January 2016 to the cross-sell 

metric, which had the effect of reporting a higher value for the cross-sell metric: “Our Community 

Banking cross-sell metrics, as revised for prior periods to conform to the current period presentation, 

were 6.28, 6.32, 6.31, 6.37 and 6.36 as of February 2016, May 2015 and November 2015, 2014 and 

2013, respectively.” No mention was made of the “active cross-sell” metric. 

 

42. Wells Fargo’s second quarter 2016 report on Form 10-Q was materially false and 

misleading, as it presented the cross-sell metric as purportedly measuring the success of a strategy that 

was based on its customers’ “needs.” In truth, the metric remained inflated by accounts and products 

that were the results of sales misconduct and that were not needed, wanted, or used by customers. 

 

43. On September 8, 2016, three settlements with Wells Fargo were announced, each 

related to allegations of sales misconduct by bankers. First, the Consumer Financial Protection 

Bureau fined Wells Fargo $100 million for unlawfully opening more than two million deposit and 

credit card accounts that may not have been authorized by consumers. Second, Wells Fargo agreed to 

pay an additional $35 million penalty to the Office of the Comptroller of the Currency, the bank’s 

principal regulator, in an action also alleging sales misconduct by bankers. Third, Wells Fargo 

agreed to settle the lawsuit brought by the City of Los Angeles by paying $50 million for similarly-

described conduct. 

 

44. Shortly after the announced settlements, on September 27, 2016, the independent 

directors of Wells Fargo’s board of directors announced that the Company had launched an 

investigation into the Company’s retail banking sales practices, and that it would take certain 

personnel actions relating to Stumpf and Tolstedt. The independent directors agreed with Stumpf that 

he would forfeit all of his outstanding unvested equity awards, valued at approximately $41 million 

and that he also would not receive a bonus for 2016. In April 2017, the board additionally 

retroactively clawed back approximately $28 million in previous equity awards from Stumpf. 

 

45. On October 12, 2016, Wells Fargo announced the retirement of Stumpf from the 

Company, which included his position as CEO and as a member of the board of directors. 
 

Violations 

 

46. A statement or omission is material if there is a substantial likelihood that a 

reasonable investor would consider it important in making an investment decision. Basic Inc. v. 

Levinson, 485 U.S. 224, 231-32 (1988). 

 

47. As a result of the conduct described above, Stumpf violated Section 17(a)(2) of the 

Securities Act, which proscribes obtaining money or property through misstatements or omissions 

about material facts, and Section 17(a)(3) of the Securities Act, which proscribes any transaction or 

course of business that operates or would operate as a fraud or deceit upon a purchaser of 

securities.  A violation of these provisions does not require scienter and may rest on a finding of 

negligence.  See Aaron v. SEC, 446 U.S. 680, 685, 701-02 (1980). 

 



11   

Respondent’s Remedial Efforts 

 

48. In determining to accept Stumpf’s Offer, the Commission considered remedial acts 

undertaken by him and cooperation afforded the Commission staff. 

 

IV. 

 

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed 

to in Respondent Stumpf’s Offer. 

 

Accordingly, it is hereby ORDERED that: 

 

A. Pursuant to Section 8A of the Securities Act, Respondent Stumpf cease and desist 

from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) 

of the Securities Act. 

 

B. Respondent shall, within 30 days of the entry of this Order, pay a civil money penalty 

in the amount of $2,500,000.00 to the Securities and Exchange Commission.  If timely payment is not 

made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  

  

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request; 

  

(2)          Respondent may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

  

(3)          Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed 

to: 

  

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

  

Payments by check or money order must be accompanied by a cover letter identifying John G. Stumpf 

as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover 

letter and check or money order must be sent to Monique C. Winkler, Associate Regional Director, 

Division of Enforcement, Securities and Exchange Commission, 44 Montgomery Street, Suite 2800, 

San Francisco, CA 94104. 

 

C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the penalties referenced in paragraph IV.B above. This Fair Fund shall be added to or combined 

with the Fair Fund established in the related administrative proceeding in In the Matter of Wells Fargo 

& Company, Administrative Proceeding File No. 3-19704 (Feb. 21, 2020).  Amounts ordered to be 



12   

paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government 

for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, 

Respondent agrees that in any Related Investor Action, he shall not argue that he is entitled to, nor 

shall he benefit by, offset or reduction of any award of compensatory damages by the amount of any 

part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”). If the court in any 

Related Investor Action grants such a Penalty Offset, Respondent agrees that he shall, within 30 days 

after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in this action 

and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment 

shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the 

civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” 

means a private damages action brought against Respondent by or on behalf of one or more investors 

based on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

V. 

 

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 523 of 

the Bankruptcy Code, 11 U.S.C. § 523, the findings in this Order are true and admitted by 

Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 

amounts due by Respondent under this Order or any other judgment, order, consent order, decree or 

settlement agreement entered in connection with this proceeding, is a debt for the violation by 

Respondent of the federal securities laws or any regulation or order issued under such laws, as set 

forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19). 

 
By the Commission. 

 

 

Vanessa A. Countryman 

Secretary 


	UNITED_STATES_OF_AMERICA
	In_the_Matter_of
	JOHN_G._STUMPF,
	Respondent.
	Respondent
	Other_Relevant_Entity
	IV.