Wells Fargo’s brokerage firm has agreed to pay $6.58 million to settle federal civil charges that it failed to adequately inform investors about the risks tied to mortgage securities it sold. According to the Securities and Exchange Commission, Minneapolis-based Wells Fargo Brokerage Services improperly sold the high-risk investments to cities and towns, non-profit institutions and other investors in 2007. This was when the housing bust was under way. The firm, now called Wells Fargo Securities and based in Charlotte, will pay a $6.5 million civil fine and $81,571 in restitution plus interest in the settlement.
A former firm vice president, Shawn McMurtry, also agreed to settle the charges. He will pay a $25,000 civil fine and will be suspended for six months from the securities industry. As is usually the case, neither San Francisco-based Wells Fargo, the fourth-largest U.S. bank by assets, nor McMurtry admitted or denied wrongdoing. According to a Wells Fargo spokesman, the brokerage firm was “completely revamped” after Wells Fargo acquired Wachovia in a merger in December 2008. I am not exactly sure how the huge bank defines “revamping,” but hopefully it includes following the law.
The settlement was the SEC’s latest enforcement action related to the financial crisis since it began a broad investigation in late 2008 into the actions of Wall Street banks and other financial firms. In a major SEC case, Goldman Sachs agreed in July 2010 to pay $550 million to settle charges of misleading buyers of a complex mortgage investment. JPMorgan Chase resolved similar charges in June 2011 and paid $153.6 million. Citigroup agreed to pay $285 million to settle similar charges, though that settlement was struck down by a federal judge last November.
Source: USA Today
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