Wells REIT Fine Stirs Controversy Over Non-Traded REITs

A recent $300,000 fine against the Wells REIT is raising red flags among investors and regulators alike regarding the risks of non-traded REIT investments.

According to the Financial Industry Regulatory Authority (FINRA), Wells Investment Securities, the broker/dealer distributor for non-traded REIT sponsor Wells Real Estate Funds, used improper sales materials when selling the Wells Timberland REIT from May 2007 to September 2009. The advertising literature contained 116 “improper, unwarranted or exaggerated statements,” FINRA said, with some statements about the diversification, distributions and redemptions of the Wells REIT misleading.

“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,” FINRA executive vice president and chief of enforcement Brad Bennett said in a statement.

For some time now, FINRA has been investigating broker/dealers that market and sell non-traded REIT shares to investors and, specifically, whether the B-Ds are properly disclosing the risks associated with the products.

If you have invested in the Wells REIT or another non-traded REIT and suffered financial losses, please contact us to tell your story.