Wells Fargo shareholders seek changes after accounts scandal

September 15, 2016 1:01 PM EDT

A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, U.S. on February 10, 2015. REUTERS/Jim Young/File Photo

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By Ross Kerber

BOSTON (Reuters) - Activist shareholders of Well Fargo & Co said on Thursday they had filed resolutions raising the prospect of deep changes at the bank in the wake of a fake accounts scandal that has knocked billions of dollars off the institution's market capitalization.

Investor Bart Naylor, who works for Public Citizen, the consumer advocacy group in Washington, called for Wells Fargo directors to study "whether the divestiture of all non-core banking business segments would enhance shareholder value, and whether it should divide into a number of independent firms."

Naylor has submitted similar resolutions in prior years but received little support, such as at JPMorgan where the idea was backed by just 3 percent of shares cast last May.

In addition, activist investor Needmor Fund said it filed a shareholder resolution calling on the San Francisco-based bank to split the roles of chairman and chief executive, saying management needs strong oversight from the board "in light of the recent scandal."

Wells Fargo representatives did not immediately comment on the measures.

The bank's agreement last week to pay $190 million to settle claims it created roughly 2 million accounts that customers did not want has shaken investors, with the bank's stock falling about 7.5 percent, cutting its market capitalization by some $19 billion.

The resolutions, meanwhile, have rehashed issues that have been hard-fought between investors and executives at other big banks coming out of the financial crisis, battles that to date Wells Fargo had largely sidestepped.

"The financial crisis that began in 2008 underscored potential weaknesses in the practices of large, inter-connected financial institutions such as Wells Fargo," reads the support statement on one of the resolutions.

The resolution filed by Needmor Fund of Toledo, which said it owns 2,225 Wells Fargo shares, calls for the split in management roles to "be phased in for the next CEO transition."

The bank defeated a similar resolution to split the jobs, both of which are currently held by John Stumpf, at its last annual meeting in April in Scottsdale, Arizona. Only 17 percent of votes were cast in support of the resolution.

Shareholder activist John Chevedden, who lives in Southern California, on Thursday called on the bank to hold its next annual meeting in the spring of 2017 in San Francisco even though it would probably draw more protesters, critical shareholders and media attention.

Despite the possible unwanted attention, Chevedden said, Wells Fargo should "face the music."

(Reporting by Ross Kerber; Editing by Alan Crosby)

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