Wells Fargo Bank has agreed to pay $1.4 billion to investors to settle allegations that the bank promised strong returns on auction-rate securities before the markets froze. The bank will have to buy back all types of nonliquid auction-rate securities (ARS) from thousands of retail customers, charities and small businesses across the country by February 2010. The settlement resolves a lawsuit filed by California Attorney General Jerry Brown and a separate investigation by a multistate task force of securities regulators formed by the North American Securities Administrators Association, an investor-protection group.
Wells Fargo marketed the securities as highly lucrative, cashlike investments, convincing investors, businesses and charities that they could get their money back every eight days. As part of the settlements, the bank will pay $1.9 million in penalties to individual states. Eligible investors will receive information about the buyback offer by mail within 90 days from the settlement date, which I believe was November 18th.
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