Washington State Department of Financial Institutions

Consumer Alert
Wells Fargo Auction Rate Securities Update

Update: Wells Fargo Agrees To Buy Back Auction Rate Securities From Its Customers
On November 18, 2009, the Washington Department of Financial Institutions (DFI) and the North American Securities Administrators Association (NASAA) announced a settlement in principle with Wells Fargo Investments LLC. Learn more.

Auctions for most auction rate securities (ARS) held by brokerage firm customers nationwide failed in February 2008. As a result of this failure, DFI’s Securities Division opened investigations into sales of ARS in the State of Washington by a number of broker-dealers, including the Wells Fargo broker-dealers. DFI’s Securities Division also joined a nationwide task force of state securities regulators to address sales practices relating to ARS and to help investors get access to their frozen funds.

DFI, in October and November of 2008, negotiated with Wells Fargo with the goal of getting Wells Fargo to offer to buy back all ARS still frozen in Wells Fargo customers’ accounts. Representatives from four other states also participated in the negotiations. Unfortunately, negotiations did not lead to Wells Fargo agreeing to release investor funds.

On Nov. 20, 2008, DFI’s Division of Securities issued a Statement of Charges against Wells Fargo Investments LLC, Wells Fargo Brokerage Services LLC, and Wells Fargo Institutional Securities LLC. The Statement of Charges notified the Wells Fargo broker-dealers that the Division intended to enter an order: to cease and desist, to offer restitution, and to impose fines and recover costs. The Wells Fargo broker-dealers have demanded a hearing on the Statement of Charges. Wells Fargo’s demand for a hearing delays the order of restitution and other enforcement action sought by the Division pending the outcome of the hearing. You may read the Statement of Charges here: S-08-141-08-SC01 (PDF)*.

On November 18, 2009, the Washington Department of Financial Institutions (DFI) and the North American Securities Administrators Association (NASAA) announced a settlement in principle with Wells Fargo Investments LLC. Learn more.

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