SEC charges Wells Fargo banker, nine others with insider-trading

WASHINGTON Wed Dec 5, 2012 6:48pm EST

A Wells Fargo sign is seen outside a banking branch in New York July 13, 2012. REUTERS/Shannon Stapleton

A Wells Fargo sign is seen outside a banking branch in New York July 13, 2012.

Credit: Reuters/Shannon Stapleton

WASHINGTON (Reuters) - U.S. securities regulators charged a Wells Fargo investment banker and nine others with fraud on Wednesday in connection with their alleged role in an insider-trading ring that earned more than $11 million by trading on tips about impending mergers.

The Securities and Exchange Commission said that John Femenia, 30, misused his position at a unit of Wells Fargo to obtain material, non-public information about four different mergers involving clients.

The SEC said Femenia then tipped his friend, Shawn Hegedus, a registered broker-dealer. The SEC says the two then tipped other friends, resulting in a "massive, serial insider-trading ring" that spread across five states.

The SEC said it has already obtained a court order to freeze the defendants' assets.

"Here you have an investment banker who clearly knew better that inside information can't form the basis of trading decisions," said William Hicks, associate director for enforcement in the SEC's Atlanta Regional Office.

"Instead, he basically started a phone tree of nonpublic information to enrich friends and others."

According to the SEC's complaint, filed in the U.S. District Court for the Western District of North Carolina, Femenia is still employed in the Wells Fargo New York office with the Industrials Investment Banking Group. Previously, he worked in the North Carolina office.

A spokeswoman for Wells Fargo said the bank had just learned about the allegations against Femenia on Tuesday and immediately placed him on leave, adding that the bank was "assisting and fully cooperating with the SEC and other agencies.

"Wells Fargo has detailed policies and training programs on the handling of confidential information, and we have a zero-tolerance policy for the misuse of such information," the spokeswoman said.

Hegedus, 31, was previously employed by brokerages John Thomas Financial, and more recently, Gradient Securities LLC, until April 2012.

Attempts to reach Femenia and Hegedus were unsuccessful, and the SEC said there is no known defense counsel at this time.

The other defendants named in the SEC's civil complaint include friends of Femenia and Hegedus, as well as the father of one of Femenia's friends, who live in states ranging from California to Florida and South Carolina.

Two companies with ties to Hegedus and his girlfriend were also named as defendants in the SEC's lawsuit.

The SEC said Femenia was able to profit from stock and options trades in companies that were being acquired, and that "at least one trader provided a portion of his profits to Femenia in exchange for the information," according to an SEC press release.

(Reporting by Sarah N. Lynch; Editing by Phil Berlowitz, Bernard Orr; and Jan Paschal)

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Comments (3)
grandma28 wrote:
Now when are they going to go after the Congress for doing the same thing? Probably never…

Dec 05, 2012 6:38pm EST  --  Report as abuse
Harry079 wrote:
When will they ever learn, when will they evvvvvvver learn?

Dec 05, 2012 6:44pm EST  --  Report as abuse
CharlesReed wrote:
What about Wells Fargo involvement in the illegal foreclosing of all the Washington Mutual Bank federal government loans (FHA, VA, USDA) that were in Ginnie Mae Mortgage Backed Securities (MBS).

We are talking about billions that Wells Fargo owes the US taxpayer in fraudulent foreclosure sales and False Claims against the FHA Mortgage Insurance Premium and VA Guaranty Fund.

Now Wells Fargo not along in this crime but they are a part of the crime and is why the FHA has up to the $31 billion shortfall, on $70 billion loan losses.

What part of Ginnie Mae program is not understood by financial reporters in the fact that Ginnie Mae cannot purchase home loan mortgages because it not a lender and is not authorized by Congress to place into debt the America taxpayer at all.

When it is convenient Ginnie Mae implies some type of ownership, however simply being in possession of a endorse blank Note without having purchase the debt per UCC 9 means the Note is worthless and is forever non-negotiable.

Simple is a Note is a Note because a debt that is attached to it is still actively owed and possession by the Note holder. Now one without the other means there not a valid contract and there is also no valid lien/title that can be recorded, which means there no foreclosure that can take place.

Not that complex once you use common sense! We the People in this Ponzi scheme are owed at total of $264 billion that includes the treble damage.

Dec 05, 2012 7:43pm EST  --  Report as abuse
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