Wells Fargo to pay $6.5 million to settle SEC charges

Wells Fargo has agreed to pay about $6.5 million to settle charges that it sold risky mortgage-backed securities without fully realizing their dangers.

The Securities and Exchange Commission (SEC) announced the deal Tuesday, and the funds will be used to help repay harmed investors.

In its announcement, the SEC said the bank did not have enough information to understand the high-risk securities it marketed to nonprofits and cities among other investors in 2007, during the lead-up to the financial crisis. 

Instead, the bank relied "almost exclusively" on the credit ratings of the products without delving into the products themselves, according to the regulator. After the housing bubble burst, ratings on such mortgage-backed securities were widely found to be inflated and did not accurately represent their risks.

An SEC official said in a statement the bank "abdicated its fundamental responsibility" as a dealer by failing to do adequate research.

The SEC also settled with former Wells Fargo Vice President Shawn McMurty for his role in the sales. He agreed to pay a $25,000 fine and is barred from working in the financial industry for six months.

Neither Wells Fargo nor McMurty admitted or denied the SEC's accusations as part of the settlement.

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