Wells Fargo & Co. and Goldman Sachs Group Inc. said Tuesday they may face federal enforcement action by the U.S. Securities and Exchange Commission related to mortgage-backed securities.
San Francisco-based Wells Fargo and New York-based Goldman said in regulatory filings that they had received Wells notices from the SEC. The notices generally indicate that the SEC plans to bring charges or take other enforcement action against a company. The notice is not required but provides a company with the chance to argue why the action shouldn't be taken.
Wells Fargo said that government agencies continue to investigate its mortgage-related practices. That includes whether the company broke any laws and properly disclosed facts and risks associated with mortgage-backed securities.
Goldman said its notice centered on an offering underwritten by the firm in late 2006 of about $1.3 billion in subprime residential mortgage-backed securities.
Both banks said they were providing information to government agencies in connection with the investigations.
Mortgage-backed securities consist of pools of mortgages that are bundled together and sold to investors. The collapse in value of the securities played a major role in the financial meltdown of 2008. A number of banks face potential action by the SEC as regulators determine whether they misrepresented the quality of the loans they were packaging and selling.
Shares of Goldman Sachs were down 81 cents at $116.30 in afterhours trading. They had ended the regular session up $1.23 at $117.11
Wells Fargo was unchanged in extended trading. Its shares gained 34 cents to $31.37 during the regular session.