Wells Fargo Investments ARS Consent

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IN THE MATTER OF:

WELLS FARGO
INVESTMENTS, LLC

(CRD No. 10582)

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CONSENT ORDER

DOCKET NO. CO-10-7810-S

I. PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);

WHEREAS, Wells Fargo Investments, LLC (“WFI”) is a broker-dealer registered under the Act with its principal office at 420 Montgomery Street, 12th Floor, San Francisco, California;

WHEREAS, the Commissioner, through the Securities and Business Investments Division of the Department of Banking (“Division”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of WFI and its affiliates to determine whether they, or any of them, had violated, were violating or were about to violate any provisions of the Act or Regulations (“Investigation”);

WHEREAS, WFI’s activities regarding the marketing of auction rate securities (“ARS”) have been the subject of coordinated investigations conducted by a multistate task force (the “Multi-State Task Force”);

WHEREAS, WFI has cooperated fully with regulators conducting the investigations by providing documentary evidence and other materials and by providing regulators with access to information relevant to their investigations;

WHEREAS, on November 18, 2009, WFI and the Multistate Task Force reached an agreement to resolve the investigations relating to WFI’s marketing of ARS to certain customers;

WHEREAS, WFI agrees, among other things, to purchase certain auction rate securities from customers and to make certain payments;

WHEREAS, Wells Fargo Securities, LLC (“WFS”) (CRD number 126292), as successor to Wells Fargo Brokerage Services, L.L.C. (“WFBS”) (CRD number 16100), and Wells Fargo Institutional Securities, LLC (“WFIS”) (CRD number 5958) have voluntarily agreed to purchase ARS from certain customers, as described in Section IV of this Consent Order, and to use their best efforts to provide liquidity solutions for certain other customers;

WHEREAS, Section 36b-15(a)(2)(K) of the Act authorizes the Commissioner to revoke any registration if, inter alia, the Commissioner finds that (1) the order is in the public interest, and (2) the registrant has failed reasonably to supervise its agents;

WHEREAS, Section 36b-27(a) of the Act authorizes the Commissioner to order any person who has violated, is violating or is about to violate any provision of the Act or any regulation, rule or order adopted or issued under the Act to cease and desist from such violation;

WHEREAS, Section 36b-27(d) of the Act authorizes the Commissioner to impose a fine of up to One Hundred Thousand Dollars ($100,000) per violation against any person who has violated any provision of the Act or any regulation, rule or order adopted or issued under the Act;

WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, an administrative proceeding initiated under Sections 36b-15(a)(2)(K) and 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;

WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;

II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, WFI, through its execution of this Consent Order, voluntarily waives the following rights:

1.	To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15(f), 36b-27(a) and 36b-27(d)(2) of the Act and Section 4-177(a) of the General Statutes of Connecticut;
2.	To present evidence and argument and to otherwise avail itself of Sections 36b-15(f), 36b-27(a) and 36b-27(d)(2) of the Act and Section 4-177c(a) of the General Statutes of Connecticut;
3.	To present its position in a hearing in which it is represented by counsel;
4.	To have a written record of the hearing made and a written decision issued by a hearing officer; and
5.	To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order;

NOW THEREFORE, the Commissioner, as administrator of the Act, hereby enters this Consent Order.

III. JURISDICTION AND CONSENT TO ENTRY OF CONSENT ORDER

WFI admits the jurisdiction of the Commissioner, neither admits nor denies the Findings of Fact and Conclusions of Law contained in this Consent Order, and consents to the entry of this Consent Order by the Commissioner as settlement of the issues contained in this Consent Order.

IV. ADDITIONAL CONSIDERATIONS AND CONDITIONS PRECEDENT
TO ENTRY OF CONSENT ORDER

As additional consideration and as conditions precedent to the entry of this Consent Order, WFI represents the following to the Commissioner.

Definitions

For purposes of these Additional Considerations and Conditions Precedent, the following terms shall have the meanings specified:

“Eligible ARS”, as that term relates to WFS (as successor to WFBS) and WFIS, means ARS that were purchased at WFBS or WFIS on or before February 13, 2008, and that have failed at auction at least once since February 13, 2008. Notwithstanding the foregoing definition, Eligible ARS shall not include ARS that were purchased at WFBS or WFIS or entities acquired by WFBS’ or WFIS’ parent companies in accounts owned, managed or advised by or through independent registered investment advisers.

“Eligible Investors” as that term relates to WFS (as successor to WFBS) and WFIS, means:

(1)	Natural persons (including their IRA accounts, testamentary trust and estate accounts, custodian UGMA and UTMA accounts, and guardianship accounts) who purchased Eligible ARS;
(2)	Charities, endowments, or foundations with Internal Revenue Code Section 501(c)(3) status, or religious corporations or entities that purchased Eligible ARS; and
(3)	Trusts, corporate trusts, corporations, employee pension plan/ERISA and Taft Hartley Act plans, educational institutions, incorporated not for profit organizations, limited liability companies, limited partnerships, non public companies, partnerships, personal holding companies, unincorporated associations, governments or quasi government entities, which are the beneficial owners of an account that purchased Eligible ARS, unless the value of the account exceeded $10 million as of January 31, 2008 or the beneficial owner had disclosed to WFI, WFS (as successor to WFBS), WFBS or WFIS total investable assets in excess of $10 million.

“Eligible Investors” as that term relates to WFS (as successor to WFBS) and WFIS, shall not include brokers, dealers, or banks acting as conduits for their customers. This provision shall not affect the rights of any beneficial owner of an account that otherwise would qualify as an Eligible Investor under subparagraphs (1), (2) or (3) of this paragraph b.

“Eligible Investors” as that term relates to WFS (as successor to WFBS) and WFIS, shall also not include any WFI, WFBS, or WFIS customers who have entered into a settlement agreement with WFI, WFBS (or WFS as its successor), or WFIS prior to November 18, 2009, or who have received a final arbitration award against WFI, WFBS (or WFS as its successor), or WFIS prior to November 18, 2009, with respect to their Eligible ARS holdings at WFI, WFBS (or WFS as its successor), or WFIS.

Additional Considerations and Conditions Precedent

WFS (as successor to WFBS) and WFIS have voluntarily agreed to purchase ARS from Eligible Investors as set forth below.

WFS (as successor to WFBS) and WFIS have agreed to use their best efforts to provide liquidity solutions to their customers who have investible assets above $10 million. WFS (as successor to WFBS) and WFIS have endeavored to work and will continue to endeavor to work with issuers and other interested parties, including regulatory and governmental entities, to expeditiously and on a best efforts basis provide liquidity solutions, such as facilitation of secondary market transactions and announced issuer redemptions of the Eligible ARS purchased through WFBS and WFIS. Although WFS (as successor to WFBS) and WFIS shall use their best efforts to offer opportunities to the institutional and other customers who are not Eligible Investors to liquidate Eligible ARS, WFS (as successor to WFBS) and WFIS are under no obligation to offer to purchase ARS from these customers.

V. FINDINGS OF FACT

Background

1.	ARS are long-term bonds issued by municipalities, corporations, and student loan companies, or perpetual equity instruments issued by closed-end mutual funds, with variable interest rates that reset through a bidding process known as a Dutch auction.
2.	In a successful Dutch auction, ARS are auctioned at par and bids with successively higher rates are accepted by the auction agent for the issuer until all of the available securities are sold. All ARS are then purchased or sold at the lowest interest rate bid that will result in all ARS placed up for auction being sold. If there are not enough buy orders to purchase all the securities being sold at auction, a failed auction occurs. In the event of an auction failure, the issuer of the ARS pays a default interest rate until the next successful auction. Broker-dealers that served as dealers for the auctions sometimes placed “support bids” on their own behalf in order to prevent auction failures.
3.	Beginning on or about February 13, 2008, there were not enough purchasers for ARS at many auctions. The broker-dealers that had previously supported the auctions for these securities ceased their practice of bidding to prevent auction failures. As a result, the ARS market experienced widespread failed auctions. ARS purchasers who wished to sell their ARS were forced to continue holding their positions.

Marketing of ARS by WFI

4.	WFI marketed ARS to some of its customers, including individual customers, small businesses, and non-profit organizations. Since at least 2001, WFI offered Auction Rate Preferred Shares (“ARPS”) through its fixed-income desk. In addition, beginning in 2006, WFI facilitated Auction Rate Debt Securities (“ARDS”) trades for select customers. WFI did not underwrite ARS and did not serve as an auction manager or auction agent.
5.	On February 14, 2008, WFI customers nationwide were holding approximately $2.95 billion in ARS in 5,692 accounts.
6.	Because of the auction failures described above, certain WFI customers who were holding ARS on February 14, 2008, have been unable to sell their ARS at auction.
7.	In connection with the marketing of ARS, WFI failed to adopt policies and procedures reasonably designed to ensure that its registered agents recommended ARS only to customers who had stated investment objectives that were consistent with their purchase of ARS. Some WFI registered agents recommended ARS to customers as a liquid, short-term investment. As a result, some WFI customers, who needed short-term access to funds, invested in ARS, even though ARS had long-term maturity dates, or in the case of ARPS, no maturity dates.

Failure to Supervise Agents Who Marketed ARS

8. WFI failed to provide adequate supervision and training to its registered agents in connection with the marketing of ARS. Some of WFI’s registered agents were not adequately educated about ARS products. WFI failed to provide timely and comprehensive sales and marketing literature regarding ARS and the mechanics of the auction process.

9.
Some WFI registered agents believed that the ARS were safe and were not aware that auctions could fail and that money invested in ARS could become frozen. In part, this was because some WFI registered agents were not aware of significant aspects of the auction rate market.

10.
WFI did not establish specific written supervisory procedures for the review of ARS transactions, nor did WFI train supervisory personnel on how to review ARS transactions.

VI. CONCLUSIONS OF LAW

11.	The Commissioner has jurisdiction over this matter pursuant to the Act.
12.	For the reasons alleged in the Findings of Fact above, WFI failed to supervise reasonably its registered agents in connection with the marketing of ARS to its customers. Such conduct in relation to ARS, if proven, would violate Section 36b-31-6f(b) of the Regulations and constitute a basis for revoking WFI’s registration under Section 36b-15(a)(2)(K) of the Act; and initiating administrative proceedings under subsections (a) and (d) of Section 36b-27 of the Act.
13.	The Commissioner finds that this Consent Order and the following relief are appropriate, in the public interest, and consistent with the purposes fairly intended by the policies and provisions of the Act.

VII. CONSENT ORDER

On the basis of the Findings of Fact, Conclusions of Law, and WFI’s consent to the entry of this Consent Order,

IT IS HEREBY ORDERED THAT:

1.
This Consent Order concludes the Investigation by the Division and any other action that the Commissioner or the Division could commence under applicable Connecticut law on behalf of Connecticut as it relates to WFI’s marketing of ARS to customers.

2.
This Consent Order is entered into solely for the purpose of resolving the referenced Multi-State Investigation, and is not intended to be used for any other purpose.

3.
WFI shall CEASE AND DESIST from violating the Act or the Regulations, and shall comply with the Act and the Regulations.

4.
Within ten (10) days after the entry of this Consent Order by the Commissioner, WFI shall pay by check made payable to “Treasurer, State of Connecticut” the sum of Six Thousand Five Hundred One and 9/100 Dollars ($6,501.09) as a fine.

5.
In the event another state securities regulator determines not to accept WFI’s state settlement offer in connection with the Multi-State Investigation referenced herein, the total amount of the Connecticut payment shall not be affected, and shall remain at $6,501.09.

6.
WFI shall have taken certain measures with respect to current and former customers that purchased “Eligible ARS” as defined in subparagraph (a) of this paragraph.

(a)
“Eligible ARS”, for the purposes of this Consent Order as it relates to WFI, shall mean ARS that were purchased for customers by WFI on or before February 13, 2008, and that have failed at auction at least once since February 13, 2008. Notwithstanding the foregoing definition, “Eligible ARS” shall not include ARS that were purchased for customers by WFI or entities acquired by Wells Fargo’s parent companies in accounts owned, managed or advised by or through independent registered investment advisers.

(b)
“Eligible Investor”, for the purposes of this Consent Order as it relates to WFI, shall mean: (1) Natural persons (including their IRA accounts, testamentary trust and estate accounts, custodian UGMA and UTMA accounts, and guardianship accounts) who purchased Eligible ARS; (2) Charities, endowments, or foundations with Internal Revenue Code Section 501(c)(3) status, or religious corporations or entities, that purchased Eligible ARS; and (3) Trusts, corporate trusts, corporations, employee pension plans/ERISA and Taft Hartley Act plans, educational institutions, incorporated not for profit organizations, limited liability companies, limited partnerships, non public companies, partnerships, personal holding companies, unincorporated associations, government or quasi government entities, which are the beneficial owners of an account that purchased Eligible ARS.

(c) “Eligible Investors”, for the purposes of this Consent Order as it relates to WFI, shall not include brokers, dealers or banks acting as conduits for their customers. This provision shall not affect the rights of any beneficial owner of an account that otherwise would qualify as an “Eligible Investor” under subparagraphs (1), (2) and (3) of paragraph (b) of this paragraph 6. “Eligible Investors”, for the purposes of this Consent Order as it relates to WFI, shall also not include any WFI customer who has entered into a settlement agreement with WFI prior to November 18, 2009, or who has received a final arbitration award against WFI prior to November 18, 2009, with respect to such customer’s Eligible ARS holdings at WFI.

(d) Purchase Offer. WFI shall offer or shall have offered to purchase from Eligible Investors, at par plus accrued and unpaid dividends/interest, their Eligible ARS that have failed at auction at least once since February 13, 2008 (the “Purchase Offer”). WFI shall make or have made the Purchase Offer and purchase the Eligible ARS either as riskless principal or agent for one or more affiliated companies, and not for its own account.

(e) (1) Notification and Buyback Procedures. WFI shall have undertaken to identify and provide notice to Eligible Investors of the relevant terms of the offer described herein no later than February 16, 2010. Such notice shall explain or shall have explained what Eligible Investors must do to accept, in whole or in part, the Purchase Offer, including how Eligible Investors may accept the Purchase Offer. WFI shall also provide written notice of the relevant terms of this Consent Order to any subsequently identified Eligible Investors.

(2)
Initial Offer Period.

(A) WFI shall have kept the Purchase Offer open for sixty (60) days after mailing the notice required by paragraph 6(e)(1) of Section VII of this Consent Order (“Initial Offer Period”).

(B) Eligible Investors may accept the Purchase Offer by notifying WFI as described in the Purchase Offer, at any time before midnight, Eastern Time, on or before the last day of the Initial Offer Period. For those Eligible Investors who accept the Purchase Offer within the Initial Offer Period, WFI shall purchase their Eligible ARS by no later than five (5) business days following the expiration of the Initial Offer Period (the “Initial Purchase Deadline”).


(3)
Second Offer Period.

(A) WFI shall undertake its best efforts to identify and provide a second notice to all Eligible Investors who do not accept the Purchase Offer within the Initial Offer Period. This second notice must satisfy the requirements in paragraph 6(e)(1) of Section VII of this Consent Order, and be sent no later than thirty (30) days after the Initial Purchase Deadline.


(B) WFI shall keep the Purchase Offer open for sixty (60) days after mailing the second notice required by paragraph 6(e)(3)(A) of this Consent Order (“Second Offer Period”).


(C) Eligible Investors may accept the Purchase Offer by notifying WFI, as described in the Purchase Offer, at any time before midnight, Eastern Time, on or before the last day of the Second Offer Period. For those Eligible Investors who accept the Purchase Offer within the Second Offer Period, WFI shall purchase their Eligible ARS by no later than five (5) business days following the expiration of the Second Offer Period (the “Second Purchase Deadline”).


(4) Revocation of Purchase Order Acceptance. An Eligible Investor may revoke the Eligible Investor’s acceptance of WFI’s Purchase Offer at any time up until WFI purchases such Eligible Investor’s Eligible ARS or provides notice of WFI’s intent to purchase such Eligible ARS.

(5) WFI’s obligation to those Eligible Investors who custodied their Eligible ARS away from WFI as of November 18, 2009 shall be contingent on: (1) WFI receiving reasonably satisfactory assurance from the financial institution currently holding the Eligible Investor’s Eligible ARS that the bidding rights associated with such Eligible ARS will be transferred to WFI; and (2) transfer of the Eligible ARS back to WFI.

(6) WFI shall use its best efforts to identify, contact and assist any Eligible Investor who has transferred the Eligible ARS out of WFI’s custody in returning such ARS to WFI’s custody, and shall not charge such Eligible Investor any fees relating to or in connection with the return to WFI or custodianship by WFI of such Eligible ARS.

(f) Customer Assistance Line. WFI shall promptly establish a dedicated toll-free telephone assistance line and e-mail address to provide information and to respond to questions concerning the terms of this Consent Order. WFI shall maintain the telephone assistance line and e-mail address through at least the Second Purchase Deadline.

(g) Relief for Eligible Investors Who Sold Below Par . No later than upon the completion of the buyback described in paragraph 6 of Section VII of this Consent Order, WFI shall undertake its best efforts to identify and provide notice to, using the notice to Eligible Investors referenced in paragraph 6(e) of Section VII of this Consent Order, Eligible Investors who sold Eligible ARS below par between February 13, 2008 and November 18, 2009 (“Below Par Seller”) and, upon receipt of satisfactory evidence of the sale, pay them the difference between par and the price at which the Eligible Investor sold the Eligible ARS, plus interest thereon at the rate of seven-day LIBOR.

(h) Consequential Damages Arbitration Process .


(1) WFI shall consent to participate in a special arbitration process (“Arbitration” for the exclusive purpose of arbitrating any Eligible Investor’s consequential damages claim arising from the Eligible Investor’s inability to sell Eligible ARS. WFI shall notify Eligible Investors of the terms of the Arbitration process through the notice described in paragraph 6(e) of Section VII of this Consent Order.

(2) The Arbitration shall be conducted under the auspices of FINRA, pursuant to the NASD Code of Arbitration Procedures for Customer Disputes, eff. April 16, 2007. WFI will pay all applicable forum and filing fees.

(3) Eligible Investors who choose to pursue such claims in the Arbitration shall bear the burden of proving that they suffered consequential damages and that such damages were caused by their inability to access funds invested in Eligible ARS. In the Arbitration, WFI shall be able to defend itself against such claims; provided, however, that WFI shall not contest liability for the illiquidity of the underlying ARS position, and provided further that, unlike the FINRA’s established special arbitration process, WFI shall be able to use a part of its defense an investor’s decision not to borrow money from WFI or its affiliates.

(4) Eligible Investors who elect to use this special arbitration process provided for herein shall not be eligible for punitive damages, or for any other type of damages other than consequential damages.

(5) Eligible Investors that elect to utilize FINRA’s special arbitration process, as set forth above, are limited to the remedies available in that process and may not bring or pursue a claim relating to Eligible ARS in another forum.

(i) Reimbursement of Negative Carry. In connection with the notices described in paragraphs 6(e) and 6(h) of Section VII of this Consent Order, WFI shall inform Eligible Investors that, if they paid more in interest on a loan through WFI or its affiliates secured by Eligible ARS than the customer received in interest or dividends from the Eligible ARS during the time the loan was outstanding (“Negative Carry”), then the Eligible Investor can provide WFI documentation evidencing the amount of Negative Carry, and upon receipt of such documentation, WFI will reimburse the Eligible Investor the amount of Negative Carry actually paid.

7.
To the extent that WFI agrees to any settlement with any NASAA jurisdiction arising out of the above-referenced coordinated investigations pertaining to WFI’s marketing and sale of ARS to retail investors as described herein, in which WFI agrees to purchase Eligible ARS from all Eligible Investors in that NASAA jurisdiction at a purchase price greater than is provided to Connecticut Eligible Investors under this Consent Order (par plus accrued and unpaid dividends/interest), the subsequent more favorable purchase price shall, upon the Commissioner’s request, be incorporated by reference into this Consent Order and become equally applicable to Connecticut Eligible Investors.

8. In consideration for the settlement terms contained in this Consent Order, the Commissioner and the Division shall not seek additional penalties or remedies, and shall terminate the Investigation with respect to WFI, WFS (as successor to WFBS), and WFIS regarding the marketing of ARS. However, if the Commissioner determines that WFS (as successor to WFBS) and WFIS have failed to adhere to their voluntary agreement as described in the Additional Considerations and Conditions Precedent in this Consent Order, the Commissioner may initiate an investigation and take enforcement action related to the marketing of ARS by WFS (as successor to WFBS) and WFIS.

9. If payment is not made by WFI as required in this Consent Order, or if WFI defaults in any of its other obligations set forth in this Consent Order, the Commissioner may send WFI a written notice of default and, if within ten (10) days after receiving the written notice, WFI does not cure the default, the Commissioner may move to enforce this Consent Order before any competent administrative body and/or court of law.

10. This Consent Order is not intended to indicate that WFI or any of its affiliates or current or former employees shall be subject to any disqualifications contained in the federal securities laws, the rules and regulations thereunder, the rules and regulations of self-regulatory organizations or various states’ securities laws, including any disqualifications from relying upon the registration exemptions or safe harbor provisions. In addition, this Consent Order is not intended to form the basis for any such disqualifications.

11. Except as expressly provided in this Consent Order, for any person or entity not a party to this Consent Order, this Consent Order does not limit or create any private rights or remedies against WFI, limit or create liability of WFI, or limit or create defenses of WFI to any claims. Unless applicable law provides otherwise, by entering this Consent Order, the State of Connecticut does not waive any rights any departments, agencies, boards, commissions, authorities, political subdivisions and corporations of the state, other than the Commissioner and the Division in their administration of the Act, may have under applicable law, to the extent any such rights exist, to assert a claim, cause of action, or application for compensatory, nominal and/or punitive damages, administrative, civil, criminal, or injunctive relief against WFI in connection with the marketing of ARS by WFI.

12. This Consent Order shall not disqualify WFI or any of its affiliates or current or former employees from any business that they otherwise are qualified or licensed to perform under applicable state law, and this Consent Order is not intended to form the basis for any disqualification.

13. This Consent Order shall be binding upon WFI, its affiliates, successors and assigns with respect to all conduct subject to the provisions herein and all future obligations, responsibilities, undertakings, commitments, limitations, restrictions, events and conditions.

14. Nothing contained in this Consent Order shall be deemed to be an admission of any liability, fault or wrongdoing by WFI or its affiliates. This Consent Order shall not be admissible in any hearing, action, or proceeding except to prove the existence of this Consent Order or to enforce the terms of this Consent Order.

NOW THEREFORE, the Commissioner enters the following:

1.	The Findings of Fact, Conclusions of Law and Consent Order set forth above, be and are hereby entered;
2.	Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take action as stated in paragraph 9 of Section VII of this Consent Order against WFI, its affiliates or successors in interest based upon a violation of this Consent Order if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by WFI and reflected herein are subsequently discovered to be untrue; and
3.	This Consent Order shall become final when entered.

So ordered at Hartford, Connecticut		_______/s/_________
this 14th day of December 2010.		Howard F. Pitkin
Banking Commissioner

CONSENT TO ENTRY OF ORDER

I, Lisa Amador, state on behalf of Wells Fargo Investments, LLC, that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Wells Fargo Investments, LLC; that Wells Fargo Investments, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Wells Fargo Investments, LLC voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.

	Wells Fargo Investments, LLC


By:	__________ /s/__________________
	Name: Lisa Amador
Title: Chief Compliance Officer

California All-Purpose Acknowledgement

State of California

County of San Francisco

On Dec. 6, 2010 before me, Jose L. Delgadillo, Notary Public personally appeared Lisa Amador who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _____/s/__________
Jose L. Delgadillo
Commission # 1909547
Notary Public – California
San Francisco County
My Comm. Expires Nov 17, 2014

Administrative Orders and Settlements

8.	WFI failed to provide adequate supervision and training to its registered agents in connection with the marketing of ARS. Some of WFI’s registered agents were not adequately educated about ARS products. WFI failed to provide timely and comprehensive sales and marketing literature regarding ARS and the mechanics of the auction process.
9.	Some WFI registered agents believed that the ARS were safe and were not aware that auctions could fail and that money invested in ARS could become frozen. In part, this was because some WFI registered agents were not aware of significant aspects of the auction rate market.
10.	WFI did not establish specific written supervisory procedures for the review of ARS transactions, nor did WFI train supervisory personnel on how to review ARS transactions.

7.	To the extent that WFI agrees to any settlement with any NASAA jurisdiction arising out of the above-referenced coordinated investigations pertaining to WFI’s marketing and sale of ARS to retail investors as described herein, in which WFI agrees to purchase Eligible ARS from all Eligible Investors in that NASAA jurisdiction at a purchase price greater than is provided to Connecticut Eligible Investors under this Consent Order (par plus accrued and unpaid dividends/interest), the subsequent more favorable purchase price shall, upon the Commissioner’s request, be incorporated by reference into this Consent Order and become equally applicable to Connecticut Eligible Investors.
8.	In consideration for the settlement terms contained in this Consent Order, the Commissioner and the Division shall not seek additional penalties or remedies, and shall terminate the Investigation with respect to WFI, WFS (as successor to WFBS), and WFIS regarding the marketing of ARS. However, if the Commissioner determines that WFS (as successor to WFBS) and WFIS have failed to adhere to their voluntary agreement as described in the Additional Considerations and Conditions Precedent in this Consent Order, the Commissioner may initiate an investigation and take enforcement action related to the marketing of ARS by WFS (as successor to WFBS) and WFIS.
9.	If payment is not made by WFI as required in this Consent Order, or if WFI defaults in any of its other obligations set forth in this Consent Order, the Commissioner may send WFI a written notice of default and, if within ten (10) days after receiving the written notice, WFI does not cure the default, the Commissioner may move to enforce this Consent Order before any competent administrative body and/or court of law.
10.	This Consent Order is not intended to indicate that WFI or any of its affiliates or current or former employees shall be subject to any disqualifications contained in the federal securities laws, the rules and regulations thereunder, the rules and regulations of self-regulatory organizations or various states’ securities laws, including any disqualifications from relying upon the registration exemptions or safe harbor provisions. In addition, this Consent Order is not intended to form the basis for any such disqualifications.
11.	Except as expressly provided in this Consent Order, for any person or entity not a party to this Consent Order, this Consent Order does not limit or create any private rights or remedies against WFI, limit or create liability of WFI, or limit or create defenses of WFI to any claims. Unless applicable law provides otherwise, by entering this Consent Order, the State of Connecticut does not waive any rights any departments, agencies, boards, commissions, authorities, political subdivisions and corporations of the state, other than the Commissioner and the Division in their administration of the Act, may have under applicable law, to the extent any such rights exist, to assert a claim, cause of action, or application for compensatory, nominal and/or punitive damages, administrative, civil, criminal, or injunctive relief against WFI in connection with the marketing of ARS by WFI.
12.	This Consent Order shall not disqualify WFI or any of its affiliates or current or former employees from any business that they otherwise are qualified or licensed to perform under applicable state law, and this Consent Order is not intended to form the basis for any disqualification.
13.	This Consent Order shall be binding upon WFI, its affiliates, successors and assigns with respect to all conduct subject to the provisions herein and all future obligations, responsibilities, undertakings, commitments, limitations, restrictions, events and conditions.
14.	Nothing contained in this Consent Order shall be deemed to be an admission of any liability, fault or wrongdoing by WFI or its affiliates. This Consent Order shall not be admissible in any hearing, action, or proceeding except to prove the existence of this Consent Order or to enforce the terms of this Consent Order.

State of Connecticut Department of Banking