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Wells Fargo was ordered to buy back $94 million of auction-rate debt from investors.
A Financial Industry Regulatory Authority arbitration panel has decided that the financial institution has to buy back $94 million auction rate debt from investors, James S. Cohen, a family trust for the securities, and more.
BusinessWeek reported that during 2008, the market for auction rate securities collapsed and there were no buyers.
When the situation was looked into, investors said they were told that auction rate securities were falsely promoted by underwriters and brokers as safe, cash-like investments. While Wells Fargo is reviewing the decision made, this is not the first time this institution has had to pay back money to investors.
In 2012, Reuters reported that Wells Fargo had to buy back $2.2 million in auction rates.
At the time a Financial Industry Regulatory Authority arbitration panel in Los Angeles ordered the institution to do so. Richard and Donna Wagner filed against Wells Fargo in 2010, citing that the company had misrepresented the investments and had committed fraud.
Photo courtesy of Wikimedia Commons.