Wells Fargo must face shareholder fraud claims over its recovery from scandals

It used to be that regulatory fines were an unpleasant but ‘known’ cost of doing business.  Just this past September, for instance, Wells Fargo was ordered by the US OCC to burn another $250 million worth of shareholder capital due to inadequate management of customer remuneration and risk governance improvements, stemming from problems in past years.  This occurred even as Wells Fargo approaches its fourth year anniversary under a Federal Reserve dictated asset cap with no clear expectation for when the cap might be lifted.

The OCC cited a litany of failures and management vowed to do better.  But the market, apparently considering the $250 mm fine to be a minor distraction, promptly drove up Wells stock price.  This is now a familiar pattern: poor governance practices and employee misconduct are revealed, firms accept affordable punitive fines, regulators and management teams provide vague assurances about the future, and business gets back to normal soon thereafter.