Wells Fargo to pay $62.5 million to end class action
30 May 2014 Minnesota
Image: Shutterstock
Wells Fargo and a group of institutional investors have agreed to settle their class action litigation over the bank’s alleged misrepresentation of its securities lending programme.
The bank has reportedly agreed to pay $62.5 million to the group of approximately 100 investors, led by the City of Farmington Hills Employees Retirement System, to end the class action case in the US District Court for the District of Minnesota.
In agreeing to settle the case, Wells Fargo admitted no wrongdoing.
The investors brought the case against Wells Fargo in late 2010, accusing the bank of touting its securities lending programme “as a highly secure way for … institutional clients to maximise portfolio returns and offset fees”, only to violate its fiduciary duty when it “ultimately invested collateral into risky and illiquid securities that have declined greatly in value”.
Wells Fargo plans to close the temporary securities lending programme in 2015, after selling this area of its business to CitiBank in 2011. Thirteen class action members, including the Arizona State Carpenters Defined Contribution Trust Fund, Goose Creek and ABC Retirement, remain in the programme, according to court documents.
“[A]ll remaining participants—whether class members or not and regardless of whether the settlement agreement is ultimately approved—will be exiting the programme in 2015 as the programme is wound down. That cessation is the culmination of a process that began in 2011 with the transfer of some participants to CitiBank and the continuation of a limited Wells Fargo programme for a temporary period.”
The bank has not issued a public statement on the settlement, although it did cut the amount of losses it expects to suffer as a result of litigation earlier in May, according to a regulatory filing.
Wells Fargo said that the high end of a range of possible losses due to litigation was $911 million at the end of Q1 2014, down from $951 million at the end of the previous year.
The bank has reportedly agreed to pay $62.5 million to the group of approximately 100 investors, led by the City of Farmington Hills Employees Retirement System, to end the class action case in the US District Court for the District of Minnesota.
In agreeing to settle the case, Wells Fargo admitted no wrongdoing.
The investors brought the case against Wells Fargo in late 2010, accusing the bank of touting its securities lending programme “as a highly secure way for … institutional clients to maximise portfolio returns and offset fees”, only to violate its fiduciary duty when it “ultimately invested collateral into risky and illiquid securities that have declined greatly in value”.
Wells Fargo plans to close the temporary securities lending programme in 2015, after selling this area of its business to CitiBank in 2011. Thirteen class action members, including the Arizona State Carpenters Defined Contribution Trust Fund, Goose Creek and ABC Retirement, remain in the programme, according to court documents.
“[A]ll remaining participants—whether class members or not and regardless of whether the settlement agreement is ultimately approved—will be exiting the programme in 2015 as the programme is wound down. That cessation is the culmination of a process that began in 2011 with the transfer of some participants to CitiBank and the continuation of a limited Wells Fargo programme for a temporary period.”
The bank has not issued a public statement on the settlement, although it did cut the amount of losses it expects to suffer as a result of litigation earlier in May, according to a regulatory filing.
Wells Fargo said that the high end of a range of possible losses due to litigation was $911 million at the end of Q1 2014, down from $951 million at the end of the previous year.
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