Washington State Department of Financial Institutions

News Release

Friday, April 23, 2010


Lyn Peters, Director of Communications
PH (360) 349-8501, lyn.peters@dfi.wa.gov

Suzanne Sarason, Chief of Enforcement, Division of Securities
PH (360) 902-8734, suzanne.sarason@dfi.wa.gov


Washington State Department Of Financial Institutions Settles With Wells Fargo Over Auction Rate Securities

OLYMPIA – The Washington State Department of Financial Institutions (DFI) entered into consent orders April 22, 2010 with three broker-dealers affiliated with Wells Fargo & Company in connection with their marketing of auction rate securities. The three broker-dealers are Wells Fargo Investments, LLC; Wells Fargo Securities, LLC (as successor to Wells Fargo Brokerage Services, LLC); and Wells Fargo Institutional Securities, LLC.

The consent orders represent a final and binding agreement between DFI and the Wells Fargo broker-dealers. They are consistent with the settlement in principle reached last November. The settlement was reached by the North American Securities Administrators Association Taskforce on Auction Rate Securities with Wells Fargo Investments, LLC.

Under the terms of the settlement, the Wells Fargo broker-dealers are buying back about $1.3 billion in auction rate securities that have been frozen since the auction rate securities markets froze in February 2008. The buy-back began in mid-February. More than 600 Washington customers of the Wells Fargo broker-dealers had more than $225 million in auction rate securities frozen.

“Washington DFI took primary responsibility for conducting the Wells Fargo investigation,” Suzanne Sarason, Chief of Enforcement for DFI’s Securities Division said. “This case also exemplifies how the collaborative efforts of state regulators benefit consumers not just in Washington State, but throughout the country.”

Wells Fargo Investments, Inc. will pay the State of Washington a fine of $104,982.36 as Washington’s share of the $1.9 million to be paid to securities regulators nationwide. The three Wells Fargo broker-dealers together will reimburse the State of Washington for its investigative costs of $219,116. Wells Fargo Investments, Inc. will also pay investigative costs of $25,000 to NASAA.

“As a result of the hard work and dedication of this agency’s Securities staff, Washington residents are finally able to access their assets,” Scott Jarvis, Director of DFI noted. “The outcome in this case shows how effective state securities regulators are at protecting the interests of investors.”

The consent orders conclude the enforcement action (PDF)* DFI brought in November 2008. DFI alleged that the Wells Fargo broker-dealers failed to supervise their salespersons reasonably in the marketing of auction rate securities. The agency alleged that this failure to supervise resulted in the sale of auction rate securities to customers for whom those securities were unsuitable.

About DFI
www.dfi.wa.gov ▪ 360.902.8700 ▪ 877.RINGDFI (746.4334)
The Washington State Department of Financial Institutions regulates a variety of financial service providers such as banks, credit unions, mortgage brokers, consumer loan companies, payday lenders and securities brokers and dealers. The department also works to improve financial education throughout Washington through its outreach programs and online clearinghouse www.dfi.wa.gov/financial-education. In addition to posting information about licensees and administrative actions, DFI uses the Web and social media to provide financial education information:

About Division of Securities
www.dfi.wa.gov/sd ▪ 360.902.8760 ▪ 877.RINGDFI (746.4334)
The Washington State Department of Financial Institutions Securities Division regulates securities investments, franchises, business opportunities, and off-exchange commodities sold in Washington and the firms and individuals that sell these products or provide investment advice. The Division handles complaints, conducts investigations, and takes appropriate enforcement actions to protect investors and combat fraud.