The Securities and Exchange Commission said that John Femenia, 30, misused his position at a unit of Wells Fargo to obtain material, non-public information about four different mergers involving clients.

The SEC said Femenia then tipped his friend, Shawn Hegedus, a registered broker-dealer. The SEC says the two then tipped other friends, resulting in a "massive, serial insider-trading ring" that spread across five states.

The SEC said it has already obtained a court order to freeze the defendants' assets.

"Here you have an investment banker who clearly knew better that inside information can't form the basis of trading decisions," said William Hicks, associate director for enforcement in the SEC's Atlanta Regional Office.

"Instead, he basically started a phone tree of nonpublic information to enrich friends and others."

According to the SEC's complaint, filed in the U.S. District Court for the Western District of North Carolina, Femenia is still employed in the Wells Fargo New York office with the Industrials Investment Banking Group. Previously, he worked in the North Carolina office.

A spokeswoman for Wells Fargo said the bank had just learned about the allegations against Femenia on Tuesday and immediately placed him on leave, adding that the bank was "assisting and fully cooperating with the SEC and other agencies.

"Wells Fargo has detailed policies and training programs on the handling of confidential information, and we have a zero-tolerance policy for the misuse of such information," the spokeswoman said.

Hegedus, 31, was previously employed by brokerages John Thomas Financial, and more recently, Gradient Securities LLC, until April 2012.

Attempts to reach Femenia and Hegedus were unsuccessful, and the SEC said there is no known defense counsel at this time.

The other defendants named in the SEC's civil complaint include friends of Femenia and Hegedus, as well as the father of one of Femenia's friends, who live in states ranging from California to Florida and South Carolina.

Two companies with ties to Hegedus and his girlfriend were also named as defendants in the SEC's lawsuit.

The SEC said Femenia was able to profit from stock and options trades in companies that were being acquired, and that "at least one trader provided a portion of his profits to Femenia in exchange for the information," according to an SEC press release.

(Reporting by Sarah N. Lynch; Editing by Phil Berlowitz, Bernard Orr; and Jan Paschal)

• A Permanent Economic Emergency