SEC Sues Wells Fargo in $60 Billion RMBS Case

The Securities and Exchange Commission has applied to the U.S. District Court, Northern District of California for an order enforcing subpoenas issued by the SEC during its investigation into possible fraud in the offer and sale of nearly $60 billion of residential mortgage-backed securities (RMBS) by Wells Fargo from September 2006 through early 2008.

According the court documents, the SEC is investigating whether Wells Fargo made material misrepresentations or omissions of fact to investors about the risks of investing in its RMBS.

This action follows a series of administrative subpoenas the SEC issued to Wells Fargo beginning in September 2011. The subpoenas call for the production of documents that are relevant to the SEC’s investigation, including documents relating to the quality of the mortgage loans underlying the RMBS offering, and communications involving Wells Fargo employees concerning whether the loans met Wells Fargo’s loan underwriting standards.

Now, nearly six months since the issuance of the first subpoena, Wells Fargo still has failed to produce documents responsive to several requests. Most recently, Wells Fargo failed to complete its production of responsive documents even by its own, self-selected commitment date of March 7, 2012, the court documents said. The SEC is requesting that the court issue an order compelling Wells Fargo to complete its production of all documents responsive to the subpoenas with 14 days after entry of a court order granting the SEC’s application.

According to a related Reuters story, a Wells Fargo spokeswoman called the SEC action “inappropriate” and pledged the bank would “vigorously defend itself in court” against the SEC Action. The spokeswoman said, “Wells Fargo has extensively cooperated in the commission’s investigation and believed it had an understanding with the SEC staff with regard to the outstanding documents requests; the filing of this action violates that understanding.”

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