Wells Fargo To Repay Clients Who Held Auction Rate Securities
By Shelly Banjo, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The North American Securities Administrators
Association Wednesday announced a settlement in principle between Wells Fargo
Investments LLC and state securities regulators to return approximately $1.3
billion to the firm's clients whose funds have been frozen in the auction rate
securities market.
This resolution follows more than a dozen other auction rate securities
settlements involving companies such as Merrill Lynch, UBS AG (UBS), TD
Ameritrade, Inc. (AMTD), Bank of America Corp. (BAC), Goldman Sachs Group Inc. (
GS), Deutsche Bank AG (DB), JP Morgan Chase & Co. (JPM), Citigroup Inc. (C) and
Credit Suisse Group AG (CS).
These settlements have called for these firms to repurchase more than $61
billion in auction rate securities from investors, the largest return of funds
to investors in history, NASAA said.
"We will continue to seek much needed relief for investors who have suffered
from the collapse of the ARS markets," said NASAA President and Texas Securities
Commissioner Denise Voigt Crawford in a statement.
The settlement with a brokerage unit of Wells Fargo (WFC) is the result of an
investigation led by the Securities Division of the Washington State Department
of Financial Institutions into allegations that Wells Fargo misled clients by
falsely assuring them that auction rate securities were a safe, liquid
alternative to cash, certificates of deposit or money market funds.
The auction rate securities markets froze in February 2008, triggering
complaints from investors who could not withdraw money from their accounts. At
the time of the market failures, customers of Wells Fargo Investments nationwide
held an estimated $2.95 billion in these securities.
Under the terms of the settlement, Wells Fargo agreed to buy back at face
value before April of next year all auction rate securities purchased through
its brokerage unit by investors before Feb. 13, 2008. The bank agreed to fully
reimburse certain investors who sold these securities at a discount after the
market failed; consent to public arbitration to resolve other investor claims as
a result of their inability to access their funds, and pay $1.9 million in
penalties to the states.
-By Shelly Banjo; Dow Jones Newswires; 212-416-2242; shelly.banjo@dowjones.com
(Adds information and comments from California Attorney General Edmund G. "
Jerry" Brown beginning in the seventh paragraph.)
By Shelly Banjo
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The North American Securities Administrators
Association Wednesday announced a settlement in principle between Wells Fargo
Investments LLC and state securities regulators to return approximately $1.3
billion to the firm's clients whose funds have been frozen in the auction rate
securities market.
This resolution follows more than a dozen other auction rate securities
settlements involving companies such as Merrill Lynch, UBS AG (UBS), TD
Ameritrade, Inc. (AMTD), Bank of America Corp. (BAC), Goldman Sachs Group Inc. (
GS), Deutsche Bank AG (DB), JP Morgan Chase & Co. (JPM), Citigroup Inc. (C) and
Credit Suisse Group AG (CS).
These settlements have called for these firms to repurchase more than $61
billion in auction rate securities from investors, the largest return of funds
to investors in history, NASAA said.
"We will continue to seek much needed relief for investors who have suffered
from the collapse of the ARS markets," said NASAA President and Texas Securities
Commissioner Denise Voigt Crawford in a statement.
The settlement with a brokerage unit of Wells Fargo (WFC) is the result of
investigations led by the Securities Division of the Washington State Department
of Financial Institutions and California Attorney General Edmund "Jerry" Brown
into allegations that Wells Fargo misled clients by falsely assuring them that
auction rate securities were a safe, liquid alternative to cash, certificates of
deposit or money market funds.
The auction rate securities markets froze in February 2008, triggering
complaints from investors who could not withdraw money from their accounts. At
the time of the market failures, customers of Wells Fargo Investments nationwide
held an estimated $2.95 billion in these securities.
In April, California Attorney General Brown filed a suit against three Wells
Fargo affiliates—Wells Fargo Investments, LLC; Wells Fargo Brokerage
Services, LLC; and Wells Fargo Institutional Securities, LLC—for violating
California's Securities Law. Brown's suit contended that Wells Fargo routinely
misrepresented, marketed and sold auction rate securities as safe, cash-like
investments, omitting material facts and falsely representing the products to
investors, charities and small businesses.
The lawsuit contended that the company failed to supervise and train its sales
agents and that Wells Fargo's affiliates ignored clear industry and internal
warnings about risk and previous auction failure, Brown's office said.
Under the terms of the settlement, Wells Fargo agreed to buy back at face
value before April of next year all auction rate securities purchased through
its brokerage unit by investors before Feb. 13, 2008. The bank agreed to fully
reimburse certain investors who sold these securities at a discount after the
market failed; consent to public arbitration to resolve other investor claims as
a result of their inability to access their funds, and pay $1.9 million in
penalties to the states.
"Wells Fargo convinced thousands of investors to purchase auction rate
securities with promises of robust returns and liquidity, but when the market
collapsed, investors were left out in the cold," Brown said in a statement. "
Based on misleading advice, investors bought these risky securities. Now, retail
investors and small businesses are finally getting their money back."
Brown will hold a press conference to discuss the settlement Wednesday.
-By Shelly Banjo; Dow Jones Newswires; 212-416-2242; shelly.banjo@dowjones.com
(END) Dow Jones Newswires
11-18-091004ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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