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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Ex-Wells Fargo Rep Over Private Securities Transactions

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What You Need to Know

  • The former broker violated securities laws by soliciting clients to invest in a company he had invested in, FINRA says.

The Financial Industry Regulatory Authority has barred a former Wells Fargo broker from association with any FINRA member in any capacity after he allegedly solicited clients to invest in a software and web development company that he had invested in, according to the regulator.

Without admitting or denying the findings, Scott Wayne Reed signed a letter of acceptance, waiver and consent Feb. 15 in which he agreed to FINRA’s sanction. FINRA accepted the letter Friday.

Wells Fargo declined to comment on Tuesday. Alan Baskin, an attorney based in Arizona representing Reed, did not immediately respond to a request for comment.

From April 2016 to April 2020, Reed was registered as a general securities representative, general securities principal and general securities sales supervisor through an association with Wells Fargo Clearing Services, according to FINRA.

On April 17, 2020, Wells Fargo filed a Form U5 reporting Reed’s voluntary termination from the firm while under internal review over allegations that he “recommended and facilitated investment opportunities in investments sold away from and not offered by” the firm, the FINRA letter said.

In the same Form U5 filing, Wells Fargo also reported a customer complaint that alleged Reed “recommended an investment opportunity in a company not offered by” Wells Fargo, according to FINRA.

Reed is no longer registered as a broker or RIA, according to his report on FINRA’s BrokerCheck website.

More Details

FINRA started investigating the matter after learning of the allegations reported in the Form U5, it said.

Starting in early 2019 and continuing until he was terminated from Wells Fargo in April 2020, Reed “solicited at least six individuals, including at least two Wells Fargo customers, to invest in securities issued by” a Pasadena, California-based software and web development company, FINRA alleged.

The securities were notes issued by the company, which was not named in the AWC letter, to raise capital for its ongoing operations and for investors to profit from the repayments, which included a 15% rate of interest, according to FINRA.

Reed participated in at least $3.5 million of those investments away from Wells Fargo by “providing written materials about the company to investors, and by communicating with them orally, by email and text message about the company and encouraging them to invest,” FINRA alleged.

Reed also “facilitated the transactions by, among other things, helping investors send or receive transfers of funds,” according to the AWC letter. “In one case, Reed offered to personally guarantee half of an individual’s investment” and received “selling compensation of $191,340 from the company for his role in soliciting and facilitating the investments,” FINRA alleged.

He also “personally invested over $200,000 in the company,” according to FINRA, which added that Reed failed to provide Wells Fargo with prior notice or obtain its advance approval for his participation in the private securities transactions.

By participating in private securities transactions away from Wells Fargo, Reed violated FINRA Rules 3280 (governing private securities transactions) and 2010 (governing standards of commercial honor and principles of trade), FINRA said.

(Pictured: FINRA building in New York. Photo: Ron Pechtimladjian/ALM)


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