Wells Fargo fraud lawyer

The law offices of Gana Weinstein LLP are currently investigating claims that advisor Scott Reed (Reed) has been accused by clients of engaging in fraudulent investment activities including undisclosed outside business activities (OBAs) and private securities transactions. According to records kept by The Financial Industry Regulatory Authority (FINRA), Reed was employed by Wells Fargo Clearing Services, LLC (Wells Fargo) at the time of the activity. If you have been a victim of Reed’s alleged misconduct our firm may be able to assist you in recovering funds.

Reed has been subject to regulatory action by both FINRA and the State of Arizona. With respect to the FINRA action, the regulator found that Reed consented to sanctions and findings that he participated in private securities transactions totaling at least $3.5 million without providing prior written notice to or obtaining advanced approval from his member firm. Reed solicited individuals, including at least two firm customers, to invest in securities issued by a software and web development company believed to be Pebblekick, Inc. Reed participated in these investments away from the firm 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. Reed is alleged to have received selling compensation of $191,340 from the company for his role in soliciting and facilitating the investments. It was also claimed that Reed had his own personal financial interest in the company and personally invested over $200,000 in the company.

The law offices of Gana Weinstein LLP are following the investigation by the Massachusetts Secretary of the Commonwealth’s office where the Secretary of the Commonwealth opened an investigation into Wells Fargo’s brokerage and advisory sales practices. Specifically, the state announced that the investigation seeks information related to inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers.

These three areas have been incredibly problematic in the securities industry in recent years. First, brokerage firms have been accused of referring clients from brokerage accounts into advisory accounts even though the client does not need the advisory account. The issue is that the fee structure in the advisory account is much greater and the client receives no additional investment service that the customer needs for the increased cost. The second issue concerns complex securities products often referred to as alternative investments. These investments can be problematic because they advisors are often paid high commissions in order to sell alternative investments that are rarely appropriate for investors. Finally, in recent years there have been issues with advisors recommending a 401(k) rollover into a brokerage account. The issue is that most 401(k) plans are very cost effective for investors and keep fees very low. By contrast, brokers want to amass client’s 401(k) assets where the firm and broker can charge much higher fees for services that the client does not need. Many times the client would have been better off not transferring their accounts to an advisor due to the higher cost and the potential for unsuitable investment advice.

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