Wells Fargo To Repay Clients Who Held Auction Rate Securities
November 18 2009 - 10:19AM
Dow Jones News
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
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