US Prosecutors Weigh Charges of Front-Running FX Order Against Wells Fargo

Wells Fargo’s foreign-exchange trading unit is under criminal investigation by the US Attorney’s Office for the Northern District of California for possibly front-running a client order, the latest fallout from its decision to fire four FX bankers last week.

The prosecutor’s office issued a subpoena seeking company records on positions in the billions of dollars which occurred in the last three years and resulted in a loss for the lender’s client Restaurant Brands International (NYSE:QSR), to determine whether any federal laws were broken, the WSJ reported Friday.

A bank spokeswoman said that his company is cooperating with all legal requests in order to clear up any questions and that Wells Fargo is planning on refunding hundreds of thousands of dollars to QSR, according to the report, citing unidentified people familiar with the matter.

“Wells Fargo learned of an issue associated with a foreign exchange transaction for a single client. The matter was reviewed, the client was promptly notified regarding the issue and Wells Fargo leadership took steps to hold accountable the individuals who were involved. Wells Fargo remains committed to its foreign exchange business, meeting its clients’ financial needs in an ethical way, and ensuring ongoing review of this and all business operations,” the spokeswoman added.

Earlier last week, the WSJ reported that US regulators and Wells Fargo are examining practices in the FX business and the four individuals were fired for cause. However, at this point it wasn’t clear what issues were being probed and bank didn’t name the regulator involved.

Last week, Wells Fargo spokesperson Jessica Ong declined to comment on the bank’s investigation. It added in an email statement:

“Please note that the WSJ story contains an error that has been corrected. We did not confirm that anyone was fired – we don’t comment on personnel matters in detail. Therefore, we can only confirm that Simon Fowles, Bob Gotelli, Jed Guenther and Michael Schauffler are no longer with the firm. Sara Wardell-Smith has accepted a new position as Americas Regional Leader in Wells Fargo’s Financial Institutions Group. Wells Fargo Securities’ FX business will continue to serve our clients under the leadership of Ben Bonner.”

Meanwhile, it emerged separately earlier this month that the Financial Industry Regulatory Authority (FINRA) fined Wells Fargo $3.4 million over charges that it failed to educate and train its sales force about critical aspects of certain complex financial products that it sold to investors.

(Photo: Wikimedia Commons)

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