Wells Fargo Pays $6.5M To Settle SEC Charge Over Complex Mortgage Investment Sales
Wells Fargo & Co. (NYSE: WFC) may have taken the title for the safest of the big money center banks away from J.P. Morgan Chase & Co. (NYSE: JPM), but the bank is not immune from charges about ties to the mortgage woes of recent years. The Securities and Exchange Commission charged Wells Fargo's brokerage firm and a former vice president today for selling investments tied to mortgage-backed securities without fully understanding their complexity or disclosing the risks to investors.
While this is a headline bruise for Wells Fargo, the reality is that the bank is getting out of this with a small slap on the wrist. The SEC noted that Wells Fargo agreed to pay more than $6.5 million to settle the charges and that the settlement funds would be placed into a Fair Fund for the benefit of harmed investors.
The SEC report accused Wells Fargo of improperly selling asset-backed commercial paper structured with high-risk mortgage-backed securities and collateralized debt obligations to municipalities, non-profit institutions, and other customers. The charge said that Wells Fargo did not obtain sufficient information about these investment vehicles and also charges that the bank relied almost exclusively upon their credit ratings.
Today's full SEC charge stated, "The firm's representatives failed to understand the true nature, risks, and volatility behind these products before recommending them to investors with generally conservative investment objectives… Broker-dealers must do their homework before recommending complex investments to their customers."
FULL SEC DOC
JON C. OGG
Filed under: 24/7 Wall St. Wire, Banking & Finance, Regulation Tagged: JPM, WFC