Finra Bars Ex-Wells Broker Who Raised $3.5-Mln For Software Company
The Financial Industry Regulatory Authority barred a former Wells Fargo Advisors broker for persuading his customers to invest millions in a private software company without approval, according to a settlement order published by the regulator on Friday.
Reed was accused of soliciting at least six individuals, including at least two Wells Fargo customers, to invest in securities issued by an unidentified Pasadena, California-based software and web development company, which, in turn, compensated Reed $191,340 for his role in finding investors. He also personally invested more than $200,000 in the company, Finra said.
Reed’s attorney in the case, Alan Baskin in Scottsdale, did not respond to a request for comment. Reed agreed to the bar without admitting or denying the charges, according to the settlement.
A Wells spokeswoman declined to comment.
Reed, who joined Wells Fargo in 2016, voluntarily resigned from the wirehouse in April 2020 while under internal investigation regarding allegations that he had “recommended and facilitated investment opportunities in investments sold away from and not offered by [Wells Fargo],” according to Finra and his BrokerCheck report.
The securities in question were notes issued by the Pasadena company to raise capital for its ongoing operations and repay investors with 15% interest, Finra said. In addition to fielding investors, Reed helped them send or receive transfers of funds and, in one case, he offered to personally guarantee half of an individual’s investment, according to the regulator.
Reed was found in violation of Finra’s Rule 3280, prohibiting brokers from participating “in any manner in a private securities transaction” without prior written notice to their firms describing the proposed transaction and any compensation received in connection with it. The violation also triggers a violation of Rule 2010, requiring brokers to “observe high standards of commercial honor.”
Finra has been cracking down on outside activities and private securities transactions violations as a way to prevent potential off-the-books conflicts with clients.
Reed’s BrokerCheck shows a customer complaint from March 2020 that he “recommended an investment opportunity in a company not offered by Wells Fargo Advisors.” In a comment on the disclosure, Reed said that the client stated to him that there was “no loss regarding the alleged investment” and that the claim was dropped by the client.
Reed began his brokerage career in 1999 at Ameritrade and in 2001 moved to Fidelity Brokerage Services, where he remained until 2010, according to his BrokerCheck. He had a brief stint at Meridian United Capital before joining Accelerated Capital Group from 2012 through 2015 and was registered with Coastal Equities for just five months before joining Wells Fargo in April 2016.
Reed was briefly registered with First Financial Equity Corporation, from April to late December 2020, but is not currently associated with a Finra member firm, his report indicates.