SEC subpoenas Wells Fargo in fraud investigation

 

The US Securities and Exchange Commission (SEC) announced on March 23 that it has filed a subpoena against Wells Fargo for failing to produce documentation relating to a fraud investigation concerning Wells Fargo's sale of $60 billion in residential mortgage-backed securities. Related articles Federal judge's ruling could change prosecution of Wall Street US judge rejects 'inadequate' settlement between SEC and Citi Citigroup settles CDO charges for $285 million Wells Fargo agrees $11 million SEC settlement over CDO sales The subpoena, filed in the US District Court for the Northern District of California, follows previous requests for evidence dating back to September 2011. Wells Fargo had agreed to produce materials relating to due diligence and the bank's underwriting guidelines but has so far failed to do so. The SEC's fraud investigation is examining whether Wells Fargo made material misrepresentations to investors in the sale of a series of securities between 2006 and 2008. A due diligence review of a sample of the loans in each offering was performed; those that failed to comply with the bank's underwriting standards were dropped. However, according to the regulator, the bank did not make any efforts to remove similar deficiencies from the remainder of the loans in the pool before selling them to investors. This is not the first time Wells Fargo has fallen foul of the SEC's regulations. In April 2011, the bank paid settlement charges of more than $11 million in disgorgement and penalties for violating securities laws in the sales of two collateralised debt obligations (CDOs) between 2006 and 2007. In both cases, the CDOs were sold to investors for prices much higher than the values Wells Fargo had recorded shortly before for accounting purposes.