The Securities and Exchange Commission (SEC) fined Wells Fargo $35 million for overcharging nearly 11,000 investment advisory accounts over two decades.

Without admitting or denying the SEC’s charges, Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network agreed to pay the penalty. The company previously paid accountholders approximately $40 million, including interest, to reimburse them for the overcharging, the SEC said in a press release Friday.

The details: From at least 2002 through 2022, Wells Fargo and its predecessor firms overcharged approximately 10,945 investment advisory accounts by $26.8 million, the SEC said.

Certain financial advisers agreed to reduce the firm’s standard, pre-set advisory fees for certain clients, and those changes were either hand-written or typed into the clients’ investment advisory agreements. However, those changes were not recorded during account processing, omitting the agreed-upon lower rates and causing overcharging, according to the SEC. Some of the overbilled accounts originated at Wachovia, a bank that merged with Wells Fargo in 2008, as well as legacy accounts at Wachovia from AG Edwards.

In its order, the SEC said Wells Fargo “failed to adopt and implement written compliance policies and procedures reasonably designed to prevent this overbilling.” Wells Fargo also allegedly did not “conduct any review or periodic testing of client accounts opened by its predecessor firms to confirm that negotiated fee changes to the advisory agreements had been implemented” and were accurately reflected in Wells Fargo’s billing system.

“Investment advisers must adopt and implement policies and procedures to ensure that they honor their agreements with all of their clients, including legacy clients of predecessor firms,” said Gurbir Grewal, director of the SEC’s Enforcement Division, in the release.

Compliance considerations: Wells Fargo first learned about the fee billing issues in 2018, following an inquiry from the Connecticut Department of Banking. The company found 145 accounts in Connecticut that were overbilled, then launched a review of all its investment advisory accounts nationwide, in which it found an additional 10,800 accounts that had also been overcharged, according to the SEC.

During 2022 and early 2023, Wells Fargo corrected the advisory fees to be charged to these additional accounts, the SEC said. In June 2023, Wells Fargo issued payments totaling approximately $26.3 million in reimbursement for the overcharged advisory fees, plus approximately $13 million in interest, to the affected accountholders, according to the SEC’s order.

Wells Fargo’s merger with Wachovia encountered other compliance problems, including sanctions violations by a Wachovia subsidiary that led to $98 million in fines in March.

Company response: In an emailed statement, the bank said it was pleased to resolve the matter.

“The process that caused this issue was corrected nearly a decade ago. And, as noted in the settlement documents, Wells Fargo Advisors conducted a thorough review of accounts and has fully reimbursed affected customers,” the statement said.