The New York's Metropolitan Transportation Authority (MTA) has placed any business and bond transactions and Wells Fargo Securities’ ability to approve as a senior manager for bond transactions on hold pending a review of the bank's questionable practices, according to Fidelity.
According to Patrick McCoy, finance manager for the MTA: "The responsibility review relating to Wells Fargo Securities … has not been completed because the review of recent developments that have been reported in the press is ongoing … Until such time, we will not be using Wells Fargo Securities for any future underwritings."
Wells Fargo is under investigation by federal prosecutors for illegal sales practices after allegations that employees created bank and credit card accounts without the approval of account owners in order to reach unreasonable sales targets set by executives.
The bank was fined $185 million in penalties earlier this month by the Consumer Financial Protection Bureau for creating 2 million unauthorized bank and credit card accounts.
The MTA conducts responsibility reviews for banks that responded to a request for proposals in March. These banks were designated to four pools for bond underwriting assignments and note issues for the MTA-financed portions of approved capital programs.
Wells Fargo was one of the banks that was conditionally cleared for senior manager roles by the MTA, but that decision may be reversed.
According to Robert Foran, MTA chief financial officer: "If we're able to reach a determination that Wells Fargo
is a responsible party, we'll share those facts and our analysis with the board, and we'll bring our selection back to the board."
One board member, Lawrence Schwartz, expressed doubts over Wells Fargo’s credibility: "I find it personally difficult to think that they could pass a responsibility test, but there's a due-diligence process that the agency goes through, and so, I think we should respect the process.”
The motion will be voted on by the full board on Wednesday (Sept. 28).