|
Wells Fargo Fraud - Auction-Rate Securities - The Hayes Law Firm
Investors allegedly misled auction-rate market was safe, liquid before crisis
|
|
(November 18, 2009 - Wednesday) - The company, a unit of San Francisco-based Wells Fargo & Co, has agreed to offer to buy back auction-rate securities by mid-February 2010, the North American Securities Administrators Association said in a statement. Wells Fargo will also reimburse clients who sold securities at a discount after the market froze and pay $1.9 million in penalties to states, said the statement. A Wells Fargo spokeswoman was not immediately available to comment.
The settlement is the latest in a string of deals banks across the nation have struck with regulators following the failure of the auction-rate securities market last year. States, including California, New York and Massachusetts, launched probes of Wall Street practices in the market following allegations they misled clients by assuring them the auction-rate securities were a safe, liquid alternative to cash, certificates of deposit or money market funds.
Auction-rate securities are long-term debt instruments whose interest rates are regularly reset through auctions. The market froze in February 2008 as the credit crunch took hold, trapping investors and issuers and prompting complaints from investors around the country who were unable to withdraw money from their accounts.
Wells Fargo clients held an estimated $2.95 billion in auction-rate securities at the time, said the statement. The settlement negotiations with Wells Fargo were led by securities regulators in California, Georgia, Missouri, Oregon, Texas, Utah and Washington.
Since 2008, state securities regulators have secured deals with banks including Citigroup, Merrill Lynch, Goldman Sachs, Deutsche Bank, Wachovia, JP Morgan, Morgan Stanley, UBS and TD Ameritrade. The settlements have returned more than $61 billion to investors, the largest return of funds in history, according to the association.
By:Reuters
|
