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Wells Fargo class action settled

Bloomberg News has reported, and Minnesota Lawyer has confirmed,  that Wells Fargo & Co. settled a lawsuit accusing it of mismanaging institutional investors’ collateral received as part of its securities lending program.  The case is City of Farmington Hills Employee Retirement System v. Wells Fargo, but it is a class action involving more than 60 investors. One of the law firms involved, Zimmerman Reed, says on its web site “As part of its securities lending program, Wells Fargo, a San Francisco-based bank, loaned securities of participating investors to third-party borrowers in return for cash collateral. Then, Wells Fargo invested the collateral and shared a percentage of the revenue with the original investors. Investors participating in the program entered into lending agreements with Wells Fargo. Those agreements promised that “[t]he prime considerations for the investment portfolio shall be safety of principal and liquidity requirements.” [Emphasis in original.] The investors have alleged that Wells Fargo violated those agreements by investing in illiquid and risky products such as mortgage-backed securities. And Wells Fargo concealed investment performance information from investors in order to prevent them from exiting the program.”

The case was scheduled to go to trial today before U.S. District Judge Donovan Frank. The amount of the settlement hasn’t been publicly disclosed. The judge set a preliminary approval hearing for June 5.

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