Management at Wells Investment Securities -- the broker-dealer of Leo Wells -- says the B-D is on Finra's radar. Apparently, the regulator is set to discipline the firm for allegedly violating advertising and data protection rules.
The Financial Industry Regulatory Authority Inc. is prepared to spank the broker-dealer arm of one of the largest sponsors of non-traded real estate investment trusts for allegedly failing to meet standards for advertising and keeping client information safe.
In a filing with the Securities and Exchange Commission last Friday, Wells Timberland REIT Inc. said that Finra in March notified its broker-dealer manager, Wells Investment Securities Inc., about its preliminary decision to recommend a disciplinary action against the broker-dealer.
Wells Real Estate Funds Inc. is one of the largest sponsors of investments in the non-traded REIT industry, with $11 billion in assets and 250,000 investors. Leo Wells, its founder and chairman, is well known in the independent broker-dealer industry.
The matter has been ongoing since August, when Finra notified Wells Investment Securities that it had made a preliminary decision to discipline the firm, according to the filing.
In its SEC filing, Wells Investment Securities said it “intends to vigorously defend these charges.”
At the end of last year, the Wells Timberland REIT had $360 million in assets.
Wells' REITs are extremely popular with independent broker-dealers, and it has as many as 200 selling agreements with such firms. The Wells Core Office Income REIT Inc. is another product sold by independent broker-dealers.
Industry lawyers said there was no way to determine the amount of a likely fine without knowing more details about the matter.
Nancy Condon, a Finra spokeswoman, had no comment about the matter.
A spokesman for Wells, Terrell McCollum, said he could not comment beyond the contents of the SEC filing.
Wells has been down this path before. In October 2003, Finra's precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker-dealer reps who sold the company's REITs. Those rewards included lavish entertainment and travel perquisites. At the time, the regulator also censured Mr. Wells and suspended him from acting in a principal capacity for one year.
