Another non-traded REIT has landed in hot water with regulators. The Financial Industry Regulatory Authority (FINRA) imposed a $300,000 fine against Wells Investment Securities over misleading marketing tied to Wells Timberland REIT.
In reaching the settlement, Wells Investment Securities neither admitted nor denied the charges.
According to FINRA, communications from Wells Securities about Wells Timberland contained misleading statements regarding its portfolio diversification, as well as its ability to make distributions and redemptions.
“By approving and distributing marketing materials with ambiguous and equivocal statements, Wells misled investors into thinking Wells Timberland was a REIT at a time when it was not a REIT,” said FINRA executive vice president and chief of enforcement Brad Bennett in a statement.
FINRA also found that Wells failed to have proper supervisory procedures in place to ensure that sensitive customer and proprietary information stored on laptops was adequately safeguarded.
As reported Nov. 22 by Investment News, this is not the first time that Wells Securities has had a run-in with regulators over REITs. In October 2003, FINRA’s precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker/dealer representatives who sold the company’s REITs. Those rewards included lavish entertainment and travel perquisites. FINRA also censured Leo Wells, founder and chairman of Wells Real Estate Funds, suspending him from acting in a principal capacity for one year.
Wells Real Estate Funds is one of the largest sponsors of investments in the non-traded REIT industry, with $11 billion in assets and 250,000 investors.