Washington State Department of Financial Institutions

DFI Issues Statement Of Charges Against
Wells Fargo Brokerage Firms

On November 20, 2008, the Securities Division of the Department of Financial Institutions (DFI) after a lengthy investigation issued a Statement of Charges against Wells Fargo brokerages firms.

The Securities Division charges that the Wells Fargo firms made unsuitable recommendations to their customers and misled their customers in the sale of more than $175 million of auction rate securities in the State of Washington.

The firms sold more than $3.9 billion nationwide. To date many other brokerage firms have agreed to offer the return funds to their auction rate customers.

The Securities Division has brought these charges seeking return of funds to Washington State customers who hold auction rate securities they bought from Wells Fargo.

View the Statement of Charges (PDF)*.

Wells Fargo Statement of Charges FAQs

Why is Washington State taking action?

Many customers of Wells Fargo brokerage firms, Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Securities, LLC have complained that Wells Fargo sold them auction rate securities as similar to money market securities and that Wells Fargo has refused to buy them back and these customers do not have immediate access to use all their funds.

What does DFI allege was wrong with the way Wells Fargo sold auction rate securities?

DFI alleges that Wells Fargo misrepresented the securities as cash-equivalent or short term when there was no assurance that they were either. DFI alleges that Wells Fargo sold auction rate securities to customer for who they were not suitable. DFI alleges that Wells Fargo did not supervise its salespersons reasonably in connection with the sale of auction rate securities.

What are auction rate securities?

Auction rate securities are municipal and corporate bonds, as well as preferred stocks, with interest rates or dividend yields that are periodically reset through auctions, typically every 7, 14, 28, or 35 days. Auction rate bonds are usually issued with maturities of 30 years, but the maturities can range from five years to perpetuity.

How many auction rate securities were sold?

Wells Fargo sold over $175 million of auction rate securities in the State of Washington. Nationwide it sold over $3.93 billion.

What relief is DFI seeking against Wells Fargo?

Repayment and other relief for investors whose money is frozen in auction rate securities, a fine and costs, and license suspension if Wells Fargo fails to comply with any Securities Division order.

Does the statement of charges stop Wells Fargo from doing business as a broker-dealer in the state of Washington?

No, the statement of charges notifies Wells Fargo of DFI’s intent to take enforcement action in the future if Wells Fargo does not proceed to assist customers by offering to buy back their auction rate securities. Wells Fargo has the opportunity to have a hearing prior to any enforcement action on the matter.

Which broker-dealers are named in the statement of charges?

Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Securities, LLC.

Is Washington acting with other states?

The Washington State Securities Division, a division of the State’s Department of Financial Institutions, is the lead state for the North American Securities Administrators Association, which represents all states in the United States. Washington’s Statement of Charges focuses primarily on matters that took place in Washington State.

If I invested in auction rate securities through Wells Fargo, who can I complain to?

You can file a complaint with DFI. You can file complaints online at http://dfi.wa.gov/sd/complaint.htm or you can call us at 360-902-8760 or 1-877-RING DFI.