SEC Charges Wells Fargo for Selling Complex Investments Without Disclosing Risks

The Securities and Exchange Commission today charged Wells Fargo's

brokerage firm and a former vice president for selling investments tied to mortgage-backed securities without fully understanding their complexity or disclosing the risks to investors. The SEC found that Wells Fargo improperly sold asset-backed commercial paper structured with high-risk mortgage-backed securities and collateralized debt obligations (CDOs) to municipalities, non-profit institutions, and other customers. Wells Fargo did not obtain sufficient information about these investment vehicles and relied almost exclusively upon their credit ratings. 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. Wells Fargo agreed to pay more than $6.5 million to settle the SEC's charges. The money will be placed into a Fair Fund for the benefit of harmed investors.