What’s in your wallet? The Man From FCPA thought about that ubiquitous bank card commercial when reading a recent article in the New York Times that Wells Fargo is now under scrutiny for its termination of certain whistleblower employees in their ongoing fraud scandal. It turns out that federal regulations require that anytime a “broker or certain other registered representatives leave a bank—voluntarily or otherwise—the company is required to file a notice with the Financial Industry Regulatory Authority” (FINRA). The form is a U5 and it “includes a field where the bank must disclose any allegations that played a role in the employee’s departure.” In the financial services industry, a negative mark by an employer on this form can blackball a person’s entire career.
U.S. Senators have asked why this information was not filled in by Wells Fargo for those employees who were terminated and subject to this FINRA regulation. If the bank had done so, it might have given FINRA insight into the problem earlier. Conversely, Senator Elizabeth Warren and others have asked “if Wells Fargo used unfavorable U5 filings as a weapon against who tried to draw attention to the bank’s deeds misdeeds.”
These events brought up a couple of key issues for the compliance practitioner. First is what is in your (corporate) wallet; meaning what information is in your files that could point to a trend or issue that might lead to a greater problem or even legal violation. If employees are terminated for engaging in certain conduct, what does that trend tell you. What if that information is required to be reported to a regulator? Is that information correct and have you violated federal law by reporting incorrect data?
Equally importantly, what if Senator Warren is correct and some of the employees terminated were whistleblowers? Is this an illegal retaliation under Dodd-Frank? Is such conduct some type of pre-taliation that the SEC has recently sanctioned companies for with enforcement actions. Wells Fargo certainly is the scandal which keeps on giving and giving and giving to the compliance profession.