The hefty penalty stems from recommendations the company made to investors in 2007. At the time, the bank advised 10 customers to buy into high-risk investments. The SEC claims Wells Fargo didn't do enough research on the products or tell investors how risky the mortgage-backed securities might be. Two customers reported losses totaling $4.2 million dollars after following those recommendations.
As part of the settlement, former Wells Fargo VP, Shawn McMurtry, will pay a $25,000 penalty and he is banned from the banking industry for six months.
The company and McMurtry settled the case without admitting or denying the accusations. The money collected will be paid back to the affected customers.