Local investors affected as state, bank settle on auction-rate securities
Wells Fargo has agreed to buy back about $1.3 billion in auction rate securities from investors whose funds were frozen as part of a nationwide securities scandal.
The deal, part of a tentative settlement agreement reached Wednesday with the Washington Department of Financial Institutions and the North American Securities Administrators Association, will return as much as $150 million to 300 to 400 Washington investors, as well as thousands more nationwide.
Wells Fargo is the last of the large U.S. investment banks to reach a settlement agreement after state and federal regulators launched a nationwide investigation into the auction-rate securities market in April 2008. They found a $330 billion nationwide investment scandal in which banks allegedly misled consumers about the level of risk involved in what they called auction-rate securities — long-term municipal bonds and student loans packaged in chunks and sold as low-risk, short-term investments, similar to money market accounts.
The Washington Department of Financial Institutions led the investigation of San Francisco-based Wells Fargo with assistance from state securities regulators in California, Georgia, Missouri, Oregon, Texas and Utah.