* Wells Fargo to pay $11 mln in SEC accord
* Settlement relates to CDO sales by Wachovia
* SEC says Wachovia overcharged investors (Adds Goldman settlement in final paragraph for comparison)
WASHINGTON, April 5 (Reuters) -A unit of Wells Fargo & Co WFC.N will pay $11 million to settle charges that Wachovia violated federal securities laws when it sold mortgage-backed securities to investors in the lead-up to the housing crisis.
The U.S. Securities and Exchange Commission had charged that the brokerage arm of Wachovia had overcharged for equity in one collateralized debt obligation and misled investors in another by saying it had acquired assets at fair market prices.
Wells Fargo Securities, a unit of Wells Fargo, will pay the $11 million in disgorgement and penalties without admitting or denying the charges, the SEC said on Tuesday. Wells Fargo bought Wachovia at the end of 2008.
The SEC alleged that Wachovia sold overpriced equity in a CDO known as Grant Avenue II to the Zuni Indian Tribe and another retail investor. It accused the bank of charging a respective 90 cents and 95 cents on the dollar, after it had marked down some of the equity on its books to just 52.7 cents on the dollar.
Second, it said Wachovia misled investors in another CDO, Longshore 3, by saying it had acquired assets from affiliates at fair market prices. In fact, the SEC said, 40 securities had been transferred at above-market prices, but Wachovia used stale prices when disclosing the value of those assets to avoid reporting losses on its books.
“Wachovia caused significant losses to the Zuni Indians and other investors by violating basic investor protection rules -- don’t charge secret excessive markups, and don’t use stale prices when telling buyers that assets are priced at fair market value,” said Robert Khuzami, the director of the SEC’s enforcement unit.
The SEC said it did not find that Wachovia acted improperly in how it structured the CDOs.
Wells Fargo spokeswoman Mary Eshet said the settlement related to actions taken by Wachovia in 2007 in the early days of the credit crisis, “The issues presented here were complex, and Wells Fargo is pleased to have resolved this matter with the SEC.”
The SEC settled with Goldman Sachs GS.N for $550 million last year over allegations that Goldman had failed to tell investors key information about a CDO. (Reporting by Sarah N. Lynch; Additional reporting by Jonathan Stempel; Editing by Gerald E. McCormick and Tim Dobbyn)
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