WFC Wells Fargo and Company

By Emily Glazer 

Problems at Wells Fargo & Co., which continues to grapple with the fallout from its sales-practices scandal, have extended to its investment bank, prompting the firm to fire with cause four foreign-exchange bankers, according to people familiar with the matter.

The bank has launched an internal investigation and regulators are also probing the foreign-exchange business, the people said. The issue that led to the firings, along with the reassignment of a senior executive, couldn't be fully determined. It involves one specific transaction with a client, who has been notified by the bank, according to a person familiar with the matter.

Until now, issues at the bank have centered on its retail-banking operation. After agreeing a year ago to a regulatory settlement over improper sales practices, the bank this summer disclosed that a review of its businesses also had revealed problems related to improperly charging customers for certain auto insurance and mortgage products.

The issues in the foreign-exchange business emerged separately from the review of business practices sparked by the sales-practices scandal, according to one of the people familiar with the matter. A Wells Fargo spokeswoman confirmed the departures after inquiries from The Wall Street Journal.

Separately, the Office of the Comptroller of the Currency earlier this week sent a confidential report to Wells Fargo about the auto-insurance product issues, according to a person familiar with that matter. The report said the bank may need to refund to customers more than the $80 million the bank had previously cited, the person said.

The foreign-exchange firings come just weeks after Wells Fargo Chief Executive Timothy Sloan was castigated during a Senate Banking Committee hearing for the bank's conduct and culture, such as how the sales problems happened for many years and why more wasn't done to stop them. Sen. Elizabeth Warren (D., Mass.) called for wider-reaching change within the bank and for Mr. Sloan's firing.

Mr. Sloan defended the bank and its handling of problems, pointing to a number of changes he has made over the past year in the operations of the retail-banking business. Mr. Sloan rose through the ranks of Wells Fargo's wholesale and investment-banking business, rather than the retail-banking side, a fact his supporters have noted to rebut critics who have questioned whether a 30-year veteran of the firm can bring about big changes.

Within the investment bank's foreign-exchange operation, those fired, people familiar with the matter said, were Simon Fowles, recently head of foreign exchange trading; Bob Gotelli, recently head of foreign-exchange sales; Jed Guenther, recently a regional head of foreign exchange; and Michael Schaufler, chief spot dealer.

The bankers didn't respond to requests for comment or declined to comment.

The prior head of the foreign exchange group, Sara Wardell-Smith, was moved to a different role at the bank, the people said. Ms. Wardell-Smith's LinkedIn profile refers to a role beginning in October leading part of Wells Fargo's financial-institutions group. She had held several roles in the bank's foreign-exchange group after joining Wells Fargo in 1995 and led the group for the past decade.

Ms. Wardell-Smith didn't respond to requests for comment.

The bank spokeswoman said Ms. Wardell-Smith accepted a new position as Americas regional leader in Wells Fargo's financial-institutions group.

The spokeswoman added that the bank's foreign-exchange business "will continue to serve our clients under the leadership of Ben Bonner."

Wells Fargo's investment-banking, securities and markets division, known as Wells Fargo Securities, is a fraction of the size of its U.S. big-bank peers. Its U.S. investment-banking market share is just about 4% as of September, according to research firm Dealogic.

And Wells Fargo's foreign-exchange desk doesn't do as much business as other banks, industry participants have said. Wells Fargo doesn't break out financial results or metrics for that group.

Unlike many other big banks, Wells Fargo's foreign-exchange operations weren't caught up in investigations into collusion between market participants to move foreign-currency rates for their own financial benefit. Those investigations led to more than $5 billion in combined penalties at U.S. and European banks and a guilty plea to criminal charges in recent years.

In regard to the retail-bank problems, the report sent to the bank by the OCC this week said Wells Fargo was too slow to identify and correct problems related to auto-insurance products known as collateral protection insurance, the person familiar with the matter said. The OCC report was first reported by the New York Times.

The OCC did acknowledge that the bank has ended the auto-insurance practices, changed management and restructured the group responsible for the sales.

An OCC spokesman declined to comment on continuing supervisory matters.

Another Wells Fargo spokeswoman reiterated that the bank discontinued the product at issue.

"We will continue to work with regulators on the remediation and will make improvements to our auto-lending business," the spokeswoman said.

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

October 20, 2017 19:36 ET (23:36 GMT)

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