The Impact Ratings Committee late last week unanimously voted to place debt directly issued by Wells Fargo and its subsidiaries in the Excluded rating category. Back in October SNW placed Wells Fargo in Under Review status due to controversy surrounding sale practices and associated business policies. The following description will be included in quarterly reports for accounts currently holding these bonds, and we will discuss this issue (and any associated developments) during our quarterly impact call:
As a result of the continued controversy surrounding sales practices and associated business policies, Wells Fargo (WFC) has been placed in an Excluded (X) status. Due to significant and ongoing concerns regarding WFC’s governance controls, specifically related to consumer sales practices, no new purchases of debt issued by the company are authorized in SNW Impact accounts and any existing holdings in client accounts must be liquidated and replaced with eligible credits in a prudent and thoughtful manner over the next 180 days.
Wells Fargo joins a number of other corporate issuers that have been assigned an Excluded (X) status under the SNW Impact Strategy as a result of business lines, practices, or policies. These include companies such as Monsanto Co., E. I. du Pont de Nemours and Co., American Electric Power Company Inc., Duke Energy Corp., Altria Group, Barrick Gold Corp., and others. Corporate debt issued by these companies and their subsidiaries are ineligible for inclusion in accounts managed through the SNW Impact Strategy.
Currently the only issuer of tax-exempt and taxable municipal debt that has been assigned such a rating is the State of North Carolina, whose appropriation-backed debt has been in this status since earlier this year—in part as a result of the passage of House Bill 2 in March 2016. The Excluded status of the State will be revisited if HB2 is repealed.
As a reminder, the rating of X results in the liquidation of all holdings in client accounts and the replacement with eligible credits in a prudent and thoughtful manner over the 180 days following the assignment of Excluded status. This process can be accelerated by the SNW Impact Team if the severity of the issue so warrants.