NASD fines Wells Investment for lavish conferences

By Dow Jones/Associated Press, 10/14/2003

NEW YORK -- The National Association of Securities Dealers has sanctioned Wells Investment Securities, a sponsor of real estate investment trusts, for rewarding representatives of broker-dealers who sell shares of their REITs with lavish entertainment and trips.

The NASD censured Wells Investment and its president, Leo Wells, and fined them a total of $150,000.

The organization also suspended Leo Wells from acting in a principal capacity for one year. Consequently, he must step down as president of Wells Investment, which acts as the broker-dealer for Wells Real Estate Funds Inc.

Wells will remain president of Wells Real Estate Funds.

In a prepared statement released yesterday, the NASD cited conferences held by Wells Investment in 2001 and 2002 that were touted as "strictly educational," but "actually constituted lavish affairs that did not meet the standards of NASD rules."

The meetings included "a Friday night `sock hop,' a beach bash and dinner at a Civil War fort with costumed Civil War heroes, fireworks, fife and drum players, skydivers, and a cannon reenactment," the NASD said. The representatives' guests were also treated to free food, transportation, lodging, and golf fees.

"Wells Investment provided less than 13 hours of training and education during the three full days of each conference," the NASD said.

When news first broke in a Forbes magazine article in August that the NASD was investigating the firm's "rah-rah sessions," the Norcross, Ga., company sent a memo to broker-dealers, denying the claim. Wells acknowledged the NASD had notified the company that it was filing a formal disciplinary action. The company, however, denied that the conventions were "rah-rah" sessions and insisted they included at least 20 hours of educational content.