Wells Fargo In $6.5M Settlement With SEC

12197_wellsfargo Wells Fargo In $6.5M Settlement With SEC Wells Fargo agreed to pay more than $6.5 million to settle charges brought by the U.S. Securities and Exchange Commission (SEC) that it sold investments tied to mortgage-backed securities without fully understanding their complexity or disclosing the risks to investors.

According to the SEC, Wells Fargo improperly sold asset-backed commercial paper structured with high-risk mortgage-backed securities and collateralized debt obligations to municipalities, nonprofit institutions and other customers without obtaining sufficient information about these investment vehicles.

The SEC says that Wells Fargo relied almost exclusively upon their credit ratings, adding the San Francisco-based lender's representatives failed to understand the true nature, risks and volatility behind these products before recommending them to investors with generally conservative investment objectives. The SEC included Shawn McMurtry, a former vice president at Wells Fargo, in its charges.

‘Broker-dealers must do their homework before recommending complex investments to their customers,’ says Elaine C. Greenberg, chief of the SEC Enforcement Division's Municipal Securities and Public Pensions Unit. ‘Municipalities and other non-profit institutions were harmed because Wells Fargo abdicated its fundamental responsibility as a broker to have a reasonable basis for its investment recommendations to customers.’

Wells Fargo and McMurtry consented to the SEC's settlement without admitting or denying the findings. The settlement funds will be placed into a Fair Fund for the benefit of harmed investors.


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