Litigation Release No. 22305 / March 23, 2012

Securities and Exchange Commission v. Wells Fargo & Company, Civil Action No. CV-1280087 CRB Misc. (N.D. Cal. March 23, 2012)

SEC Files Subpoena Enforcement Action Against Wells Fargo for Failure to Produce Documents in Mortgage-Backed Securities Investigation

The Securities and Exchange Commission announced today that it has filed a subpoena enforcement action in the U.S. District Court for the Northern District of California against Wells Fargo & Company. According to the filing, the Commission is investigating possible fraud in connection with Wells Fargo’s sale of nearly $60 billion in residential mortgage-backed securities to investors. Pursuant to subpoenas dating back to September 2011, the bank was obligated to produce (and agreed to produce) documents to the Commission, but has failed to do so. Accordingly, the Commission filed its Application for an Order Requiring Compliance with Administrative Subpoenas.

The Commission’s action relates to its investigation into whether Wells Fargo made material misrepresentations or omitted material facts in a series of offerings between September 2006 and early 2008. The Commission’s application explains that, in connection with the securitization of the loans, a due diligence review of a sample of the loans in each offering was performed. Certain loans within that sample would be dropped from the offering for failure to comply with Wells Fargo’s loan underwriting standards. However, according to the Commission, it does not appear that Wells Fargo took any steps to address similar deficiencies in the remainder of the loans in the pool, which were securitized and sold to investors. The Commission is investigating, among other things, whether Wells Fargo misrepresented to investors that the loans being securitized complied with the bank’s loan underwriting standards.

The staff in the Commission’s San Francisco Regional Office issued several subpoenas to Wells Fargo since September 2011 seeking, among other things, materials related to due diligence and to the bank’s underwriting guidelines. According to the Commission, Wells Fargo agreed to produce the documents, and set forth a timetable for doing so, yet has failed to produce many of the materials.

Pursuant to its Application, the Commission is seeking an order from the federal district court compelling Wells Fargo to comply with the Commission’s administrative subpoenas and to produce all responsive materials to the staff. The Commission notes that it is continuing to conduct a fact-finding inquiry and has not concluded that anyone has broken the law.