UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 90898 / January 11, 2021

ADMINISTRATIVE PROCEEDING

File No. 3-19704

:

:

:

WELLS FARGO & COMPANY, :

:

Respondent.

:

:

In the Matter of

ORDER APPROVING PLAN OF

DISTRIBUTION

On February 21, 2020, the Commission issued an Order Instituting Cease-and-Desist

Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings,

and Imposing a Cease-and-Desist Order (“Order”)1 against Wells Fargo & Company (“Wells

Fargo”). In the Order, the Commission found that from 2012 through 2016, Wells Fargo

violated the federal securities laws by misleading investors regarding the success of the core

business strategy of the Community Bank operating segment, its largest business unit. At all

relevant times, Wells Fargo was a publicly traded financial services corporation with common

stock registered under Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”)

and quoted on the New York Stock Exchange (Ticker: WFC). According to the Order, Wells

Fargo, among other things, failed to disclose to investors that the Community Bank’s sales model

had caused widespread unlawful and unethical sales practices misconduct that was at odds with

its investor disclosures regarding needs-based selling, and that the publicly reported cross-sell

metric included significant numbers of unused or unauthorized accounts. The Commission

found that Wells Fargo violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder

and ordered it to pay a $500 million civil money penalty to the Commission. The Commission

also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the

penalty paid by Wells Fargo can be distributed to harmed investors (the “Fair Fund”).

Wells Fargo has since paid in full. The Fair Fund has been deposited in an interestbearing account at the United States of Treasury’s Bureau of Fiscal Service. Interest and any

1

Exchange Act Rel. No. 88257 (Feb. 21, 2020).

additional funds received pursuant to Commission or Court order, agreement, or otherwise, will

be added to Fair Fund.2

The Fair Fund currently holds approximately $502.7 million, comprised of the $500

million civil penalty paid by Wells Fargo and the $2.5 million civil penalty paid by Stumpf, plus

accrued interest.

By Order dated May 21, 2020, the Commission appointed Rust Consulting, Inc. as the

fund administrator for the Fair Fund (“Rust”) and set the administrator’s bond amount at $500

million. 3

On August 6, 2020, the Secretary, pursuant to delegated authority, published a Notice of

Proposed Plan of Distribution and Opportunity for Comment (“Notice”),4 pursuant to Rule 1103

of the Commission’s Rules on Fair Fund and Disgorgement Plans (the “Commission’s Rules”).5

The Notice advised all interested persons that they may obtain a copy of the proposed plan of

distribution (“Proposed Plan”) from the Commission’s public website at

http://www.sec.gov/litigation/fairfundlist.htm or by submitting a written request to Catherine E.

Pappas, Senior Advisor, United States Securities and Exchange Commission, One Penn Center,

1617 JFK Blvd., Ste. 520, Philadelphia, PA 19103. All persons who desired to comment on the

Proposed Plan could submit their comments, in writing, no later than September 5, 2020. The

Commission received one comment during the comment period.

After considering the comment received on the Proposed Plan, the Commission staff,

working with the Fund Administrator, recommends that the Proposed Plan be approved without

modification.

After careful consideration, the Commission concludes that the Proposed Plan should be

approved without modification.6

2

An additional $2.5 million paid by John G. Stumpf in a related matter has been added to the Fair Fund as ordered.

See 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, Securities Act Rel. No. 10887 (Nov. 13, 2020), In the Matter of

John G. Stumpf, Admin. Proc. File No. 3-20148.

3

Order Appointing Fund Administrator and Setting Bond Amount, Exchange Act Rel. No. 88921 (May 21, 2020).

4

Exchange Act Rel. No. 89501 (Aug. 6, 2020).

5

17 C.F.R. § 201.1103.

6

After publication, the Commission staff discovered some incorrect cross-references in the Proposed Plan, which

have been corrected.

2

I.

A.

Public Comment on the Proposed Plan

Broadridge Financial Solutions (“Broadridge”) submitted a letter dated September 3,

2020 objecting to two paragraphs in the Proposed Plan regarding procedures to be followed with

respect to Third-Party Filers. 7

1.

Objection to Proposed Plan Paragraph 65

Broadridge objects to paragraph 65 of the Proposed Plan and, in particular, the following

provision:

Documentation generated by the Third-Party Filer as well as

affidavits in lieu of supporting documentation, will not be accepted

unless, for good cause, the Fund Administrator determines it

acceptable.

Broadridge claims that “it is the common practice in U.S. securities class actions and with

SEC Fair Funds for processing services providers to submit to Fund Administrators data files

that cover millions of transactions across thousands of claims in any one case. These files are

submitted together with supporting affidavits or similar documents verifying that the records are

true, accurate and complete. Because these affidavits are accepted in lieu of supplying millions

of pages of documents or printouts of client screen shots, the process is both accurate and

efficient. … [B]y adding new steps for claims submitted by Third-Party Filers, the [Proposed

Plan] would make claims submission significantly more burdensome and this could impede

participation.”

The Commission has considered this objection and concludes that it does not require

modification to the Proposed Plan. In consultation with members of its fund administrator pool

(“Pool Members”), including Rust, the Commission staff has determined that the requirements of

paragraph 65 are necessary for the protection of the distribution from fraudulent claims.

Moreover, paragraph 65 does not preclude the submission of data files with an affidavit, as long

as the Fund Administrator deems the documentation acceptable for good cause.

7

Third-Party Filers are defined in the Proposed Plan as a third-party, including without limitation a nominee,

custodian, or an intermediary holding in street name, who is authorized to, and submits, a claim(s) on behalf of one

or more Potential Claimants. Proposed Plan, ¶ 27.

3

2.

Objection to Proposed Plan Paragraph 66

Broadridge objects to paragraph 66 of the Proposed Plan and, in particular, the following

provisions:

Distribution Payments must be made by check or electronic

payment payable to the Potential Claimant (beneficial account

owner). The Third-Party Filer shall not be the payee of any

Distribution Payment check or electronic Distribution Payment.

Broadridge further objects to the Proposed Plan’s preclusion of the offset of Third-Party Filer

fees from distribution payments, claiming that the offset of costs from payments will preclude

Third-Party Filers from deferring their costs or aligning work performed with the payments

recovered.

The Commission has considered this objection and concludes that it does not require

modification to the Proposed Plan. In consultation with Pool Members, including Rust, the

Commission staff has determined that the preferred method of payment is directly to the Eligible

Claimant, as directed by paragraph 66. Notwithstanding, on occasion, with proper

documentation including confirmation that the underlying contract with the Eligible Claimant

exists and permits payment to the Third-Party Filer, the fund administrator may send a payment

to the Third-Party Issuer for the benefit of the Eligible Claimant. This is consistent with

paragraph 66, which permits the Fund Administrator, in consultation with the Commission staff,

to use an alternative payment arrangement, if authorized by the Eligible Claimant. The

Commission further concludes that the preclusion in paragraph 66 of the offset of Third-Party

Filer compensation from Distribution Payments is appropriate as a means by which to protect the

integrity of Commission distributions and will not significantly restrict distribution participation.

B.

Approval of the Proposed Plan

For the reasons stated above, the Commission finds that the Proposed Plan is fair and

reasonable and should be approved without modification.

II.

Accordingly, it is hereby ORDERED, pursuant to Rule 1104 of the Commission’s Rules, 8

that the Proposed Plan is approved, and the approved Plan of Distribution shall be posted

simultaneously with this Order on the Commission’s website at www.sec.gov.

By the Commission.

Vanessa A. Countryman

Secretary

8

17 C.F.R. § 201.1104.

4