The Wells Fargo debacle shone a bright light on one of the core aspects of investor relations: materiality. When is something important enough to a company’s business that it needs to tell investors?
Specifically, Wells Fargo did not publicly disclose that the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency were investigating the bank’s abusive sales practices until the September 8 announcement of the settlement and enforcement action, which included $185 million in fines.
Asked why the investigation had not been disclosed earlier, Wells Fargo Chairman and CEO John Stumpf told a U.S. Senate panel that the matter was “not a material event.”
In hindsight, the matter was about as “material” as an event can get. Through the…