(CN) - Small businesses, retail investors and charities "are finally getting their money back" from Wells Fargo, following a landmark $1.4 billion settlement with three of the bank's affiliates accused of misleading investors about auction-rate securities, California Attorney General Edmund Brown announced Wednesday.
When nationwide auction markets froze in February 2008, investors were unable to sell the auction-rate securities that Wells Fargo allegedly touted as safe and liquid investments.
"Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold," Brown said. "Retail investors and small businesses are finally getting their money back."
Earlier this year, Brown filed suit against Wells Fargo Investments, Wells Fargo Brokerage Services and Wells Fargo Institutional Securities. He said the companies ignored a March 2005 warning from the Securities and Exchange Commission, the "Big 4" accounting firms and the Financial Accounting Standards Board that such securities should not be sold as "cash equivalents."
Under Wednesday's settlement, Wells Fargo admitted no wrongdoing but agreed to buy back $1.4 billion in securities from thousands of charities, small business and retail investors nationwide. The bank will also pay legal costs and monitoring expenses.
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