Wells Fargo Advisors has tentatively agreed to a $32 million settlement of a federal class-action gender discrimination lawsuit brought in 2009 by three women financial advisors who worked at its legacy Wachovia Securities brokerage.
The advisors, who worked in New Mexico and Maryland, charged that Wachovia discriminated against them across a range of career opportunities, including signing bonuses, forgivable loans, and other compensation; the assignment of accounts and leads; and assignment to teams and other partnerships. Wachovia retaliated against them when they complained about the activity, the lawsuit also alleged.
Wells Fargo denied the charges, and doesn’t admit to any wrongdoing as part of the proposed settlement. Under the deal, however, the company agreed to implement a range of policies that covers 16 pages of the settlement agreement. Among the policies: changes in the way WFA reassigns investor accounts. The new Financial Advisor Book Reassignment policy would rely more on criteria reflecting recent or future performance, and less on historical factors such as assets under management or trailing 12-month production. Wells would work with an industrial psychologist to recast ranking factors for account reassignments. Where historical performance is evaluated, for example, the system would exclude company-sanctioned leaves of absence for such reasons as disability or parental leave.
“The account distribution models of the past, where branch managers were given great discretion as to how to allocate accounts, made them inherently vulnerable to these kinds of claims,” says James Batson, a New York attorney who obtained a $29 million jury award against UBS Warburg in 2005 over a sex discrimination complaint brought by an institutional equities saleswoman. The policy change in the WFA settlement is likely to help protect the company from similar claims in the future, he says. “Discrimination remains alive and well in the securities industry. But firms are getting better at minimizing their exposure.”
Other policies in the settlement would affect the posting of field management job openings; mandate record-keeping for upfront or signing bonuses that includes name, gender, AUM, and TTM production, with the records provided to a settlement monitor quarterly; set up diversity training for field management; and would have the monitor review women advisor participation in new teams, including how commissions are split among male and female members.
“While Wells Fargo Advisors has consistently denied the allegations of discrimination, the firm believes resolving this mater is in the best interests of the company,” Raschelle Burton, senior vice president for corporate communications at the company, said in a statement. “We remain committed to the diversity initiatives already in place, and those we will be undertaking in order to attract and retain women financial advisors.”
Big-bucks gender discrimination cases have a long history on Wall Street. Merrill Lynch paid about $250 million in settlements after facing a class action lawsuit filed in 1996. The U.S. Equal Employment Opportunity Commission settled a sex discrimination case against Morgan Stanley in 2004 for $54 million. A gender case involving Smith Barney was settled in 2008 for $33 million. And they keep coming. Last year yet another class action sex discrimination case was filed against Merrill by three women financial advisors. At Goldman Sachs, three former women employees complained in a lawsuit that “unchecked gender bias” was pervasive at the firm.
The Wells Fargo deal took more than three years to reach; a mediator, Margaret Shaw, assisted in the negotiations. It was unclear how many women would qualify as part of the class action. The settlement affects women who worked as advisors for Wachovia Securities and its successor Wells Fargo Advisors from March 17, 2003 until Jan. 25, 2011, shortly after the proposed settlement was filed with U.S. District Court in Washington, D.C. Also included in the class are women who worked for Wells Fargo Investments between Dec. 31, 2008 —the date of Wells Fargo & Co.’s acquisition of Wachovia Corp.—and Jan. 25, 2011, as well as women advisors of A.G. Edwards and Prudential Securities as of the date they joined the firm.
Women who want to participate in the claims process have until April 25 to apply. The court has scheduled a hearing for June 8 on whether to approve the settlement. For the lawsuit’s web site, click here.