Regulation

Will Buffett’s Wells Fargo Buy Tip The Regulatory Threshold?

Billionaire Warren Buffett has accumulated a 10 percent ownership in Wells Fargo, an investment level that automatically triggers a review from the Federal Reserve.

The review itself could have the possible consequence in keeping the famed investor from buying any additional shares.

The relatively high stake owned by Buffett comes as Wells Fargo was buying back stock in the open market. That, of course, means that Buffett’s stake became ever higher as a percentage of shares outstanding. Regulatory filings released earlier this week showed that Buffett’s holdings were at about 506 million shares at the end of the latest quarter.

Through Buffett’s Berkshire Hathaway, Wells Fargo is a core holding, and Buffett himself said he has been concentrating on the bank as his portfolio bet in the financial sector. The stake is worth as much as $24 billion, as measured by recent closing prices.

As defined by current regulations, investors must notify the Federal Reserve, and the public at large, about an ownership stake in a company that exceeds a threshold of 10 percent. But that self-reporting can be delayed in the event that the 10 percent ownership rule is touched because the company has been buying back stock. The regulators, at that point, then step in to review the investment. In other rules, there are restrictions on the ties between companies that are non-financial in nature and banks.

An emailed statement from a spokesperson, Mark Folk, on behalf of Wells Fargo, stated: “We value Berkshire Hathaway as a long-term shareholder and customer and appreciate the confidence that Berkshire’s executive team has shown in Wells Fargo.”

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