Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04518/USCOURTS-cand-3_05-cv-04518-31/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1331 Fed. Question: Securities Violation

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

RONALD SIEMERS, individually and on

behalf of all others similarly situated,

Plaintiff,

 v.

WELLS FARGO & CO.; WELLS FARGO

FUNDS MANAGEMENT, LLC; WELLS

CAPITAL MANAGEMENT, INC.; H.D.

VEST INVESTMENT SERVICES; WELLS

FARGO INVESTMENTS, LLC; STEPHENS,

INC.; and WELLS FARGO FUNDS TRUST,

Defendants. /

No. C 05-04518 WHA

FOURTH REQUEST FOR

SUPPLEMENTAL BRIEFING

By NOON on TUESDAY, FEBRUARY 20, 2007, please file a ten-page memorandum

(double-spaced; no footnotes; no supplements; no declarations) on the following:

1. Are underwriters or distributors strictly liable for material misstatements and

omissions in registration statements, prospectuses, and SAIs under any provision of the

securities acts that apply to mutual funds? If not strictly liable, what other provisions of the acts

apply to underwriters and distributors and what is their applicability here? Isn’t Section 12

alleged? If so, what more does Section 10 add in this case?

2. According to the proposed complaint, what was the alleged magnitude of hard

dollars credited to Wells Fargo Investments as revenue sharing in connection with the Wells

Fargo funds? What does the proposed complaint say was the source for the payments to Wells

Case 3:05-cv-04518-WHA Document 227 Filed 02/15/07 Page 1 of 3
United States District Court

For the Northern District of California

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Fargo Investments from the Wells Fargo funds, i.e., directed brokerage, excessive advisory fees,

phony research and brokerage services, or what? The complaint does not seem to allege that

any Wells Fargo funds paid directed brokerage to any defendant. True? Has any SEC or

NASD order found an violation of the NASD rules or the securities acts by any Wells Fargo

mutual fund sponsor (as opposed to Wells Fargo brokers)?

3. Many of the SEC and NASD enforcement orders rest on directed brokerage. Are

there any that specifically state that hard-dollar payments to brokers were violations of the

securities acts at the sponsor level?

4. To what extent is revenue sharing still allowed by the SEC and NASD? 

5. The defense memorandum dated January 22, 2007, stated at page 3: “Brokerdealers who do not solicit or recommend investments have no duty to speak about such

investments under Section10(b) or Section 12(a)(2). See Daou, 411 F.3d at 1029; Moore v.

Kayport Package Express, 885 F.2d 531, 537 (9th Cir. 1989); Montcalm County Bd. of

Comm’rs v. McDonald & Co. Sec., 833 F. Supp. 1225, 1232–35 (W.D. Mich. 1993).” What on

page 1029 of Daou refers to broker-dealers or to Section 10? What on page 537 of Moore

refers to broker-dealers, and didn’t the Ninth Circuit hold (on page 538) that the proposed

pleading against the stockbrokers did state a Section 12(2) claim despite the precise argument

that the complaint did not allege “the stockbrokers solicited any sales”?

6. Similarly, the defense memorandum at pages 2–3 stated: “If broker-dealers have

any duty to correct misstatements in prospectuses, that duty arises only if the broker-dealer

makes representations itself about the investment or solicits the investment. See Leboce v.

Merrill Lynch, 709 F.2d 605, 607 (9th Cir. 1983); Bear Stearns v. Buehler, 432 F. Supp. 2d

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For the Northern District of California

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 1024, 1027 (C.D. Cal. 2000).” Didn’t the Leboce decision involve only issues of California

law, not federal securities law? Isn’t the same true for Buehler?

***

The Court must insist on complete accuracy and candor. If counsel cannot do so on

time, the Court will consider an extension.

IT IS SO ORDERED.

Dated: February 15, 2007. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-04518-WHA Document 227 Filed 02/15/07 Page 3 of 3