The SEC alleged that in 2007, the bank sold customers — including nonprofit organizations and municipal governments — commercial notes backed by collateralized debt obligations, which included subprime mortgage loans, without revealing the risk of the investments.
When the mortgages behind the CDOs defaulted in large numbers, the investments collapsed and customers incurred “substantial losses.” The SEC claimed that Wells Fargo failed to properly assess the risk involved in the mortgage-backed securities and simply accepted evaluations issued by credit rating agencies like Standard & Poor’s.
Under the terms of the settlement, Wells Fargo will pay $6.5 million in fines, as well as $81,000 in other fees.
Last month, Wells Fargo reported second-quarter profits of $4.4 billion on revenue of $21.3 billion.
Additionally, Shawn Patrick McMurtry, a former vice president at the bank, will pay $25,000. McMurtry was involved in selling the mortgage-backed securities cited by the SEC. He is suspending from banking for six months.
Neither Wells Fargo nor McMurtry admitted or denied any wrongdoing under the terms of the settlement.