According to a recent InvestmentNews article, the Financial Industry Regulatory Authority Inc. (FINRA) is set to come down on Wells Investment Securities, the Georgia-based 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 data information safe.
Wells Timberland REIT Inc. said that, in March, FINRA notified its broker-dealer about its preliminary decision to recommend a disciplinary action against the broker-dealer according to a filing with the Securities and Exchange Commission last Friday.
With $11 billion in assets and 250,000 investors, Wells Real Estate Funds Inc., affiliated with Wells Investment, is based in Norcross, Georgia and is one of the largest sponsors of investments in the non-traded REIT industry. Its founder and chairman, Leo Wells, is well known in the independent broker-dealer industry. The Wells Timberland REIT had $360 million in assets at the end of last year.
According to the filing, the matter has been continuing since August of 2010, when FINRA notified Wells Investment Securities that it had made a preliminary decision to discipline the broker dealer. Industry lawyers said without knowing more details about the matter, there was no way to determine the amount of a possible fine.
This has not been the first disciplinary action against Wells Investment Securities, Inc. In October 2003, the NASD (FINRA’s) precursor, sanctioned Wells Investment Securities for rewarding broker-dealer representatives who sold the company’s REITs, with lavish entertainment and travel perquisites, in violation of NASD rules. Leo Wells was also suspended from acting in a principle capacity for one year and fined $150,000.
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