Even more trou­ble for bank af­ter data leaks

Reg­u­la­tors move in yet again

The Star Early Edition - - INTERNATIONAL - Laura Keller

WELLS Fargo, al­ready in the reg­u­la­tory spot­light be­cause of last year’s fake-ac­count scan­dal, is draw­ing re­newed scru­tiny fol­low­ing a lawyer’s unau­tho­rised re­lease of sen­si­tive client de­tails for tens of thou­sands of ac­counts be­long­ing to wealthy cus­tomers of its bro­ker­age unit.

Ac­cord­ing to a per­son with knowl­edge of the mat­ter, reg­u­la­tors have started ask­ing ques­tions about the breach af­ter the data was mis­tak­enly pro­vided to an at­tor­ney as part of a law­suit in­volv­ing two brothers, one a Wells Fargo em­ployee and the other a for­mer em­ployee. A per­son briefed on the mat­ter said Wells Fargo has de­ter­mined the ac­counts were all from one bro­ker­age branch in the North-east.

Rep­re­sen­ta­tives of the Fi­nan­cial In­dus­try Reg­u­la­tory Au­thor­ity in­for­mally con­tacted at least one of the at­tor­neys in­volved in the dis­pute for in­for­ma­tion about how the breach oc­curred and how Wells Fargo failed to de­tect it, said the per­son, who asked not to be iden­ti­fied be­cause the mat­ter isn’t pub­lic. Lawyers for the bank are tak­ing steps to con­tact reg­u­la­tors about the data breach, ac­cord­ing to an­other per­son with knowl­edge of the mat­ter. The per­son didn’t spec­ify which agen­cies.

‘Fully In­ves­ti­gate’

Ray Pel­lec­chia, a spokesman for Finra, which li­cences and su­per­vises Wall Street work­ers in­clud­ing fi­nan­cial ad­vis­ers, didn’t have an im­me­di­ate com­ment. Ju­dith Burns, a spokes­woman for the Se­cu­ri­ties and Ex­change Com­mis­sion, de­clined com­ment. Rep­re­sen­ta­tives for the Con­sumer Fi­nan­cial Pro­tec­tion Bureau and the Of­fice of the Comptroller of the Cur­rency didn’t re­spond to mes­sages seek­ing com­ment.

While this lat­est black eye may not rise to the level of the re­tail-bank de­ba­cle, it fur­ther calls into ques­tion Wells Fargo’s abil­ity to man­age its

De­tail was re­ceived on a “well-known bil­lion­aire” with at least $23m in­vested in the bank.

peo­ple and in­for­ma­tion.

“Wells Fargo takes the se­cu­rity and pri­vacy of our cus­tomers’ in­for­ma­tion very se­ri­ously,” the bank said. “We are cur­rently tak­ing le­gal ac­tion to en­sure the ad­di­tional data is not dis­sem­i­nated, and we are re­quest­ing its rapid re­turn. We con­tinue to thor­oughly in­ves­ti­gate this mat­ter and will take the proper steps, in­clud­ing cor­rec­tive ac­tion, based on the out­come of our in­ves­ti­ga­tion.”

The bank’s lat­est trou­bles come just 10 months af­ter reg­u­la­tors dis­closed that Wells Fargo em­ploy­ees had been open­ing po­ten­tially mil­lions of ac­counts in its re­tail bank­ing di­vi­sion with­out cus­tomers’ per­mis­sion over half a decade. The bank’s stock val­u­a­tion and rep­u­ta­tion were tar­nished, and Wells Fargo has spent at least $520 mil­lion (R6.7bn) on fines, re­me­di­a­tion, con­sul­tants and civil lit­i­ga­tion since, in­clud­ing a near-fi­nal $142m to con­sumers who ac­cused the bank of cre­at­ing bo­gus ac­counts.

No mon­i­tor­ing

The OCC, the bank’s main reg­u­la­tor, said in Septem­ber Wells Fargo had “failed to pro­vide suf­fi­cient over­sight” of its sales pro­grammes and didn’t ad­e­quately mon­i­tor em­ploy­ees in its re­tail bank. Part of the con­sent order the OCC forced the bank to carry out af­ter­ward in­cluded beef­ing-up in­ter­nal con­trols and risk man­age­ment.

The re­cent data breach be­gan with a fi­nan­cial spat be­tween a pair of brothers about less than $1 mil­lion. Gary Sin­der­brand, a for­mer man­ag­ing di­rec­tor at Wells Fargo Ad­vi­sors, is en­gaged in two le­gal ac­tions against his older brother Steven Sin­der­brand, a man­ag­ing di­rec­tor at the bank.

Lawyers for Gary Sin­der­brand re­ceived client names, So­cial Se­cu­rity num­bers and ac­count bal­ances ear­lier this month for 50 000 Wells Fargo ac­counts, in­clud­ing a file with de­tails on the hold­ings of a “well-known hedge fund bil­lion­aire” with at least $23 mil­lion in­vested.

PHOTO: BLOOMBERG

Wells Fargo sig­nage dis­played on the ex­te­rior of a bank branch in Dal­las, Texas. Wells Fargo is com­ing un­der a lot of pres­sure for se­cu­rity breaches.

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