Scott Wayne Reed of Scottsdale Arizona a stockbroker formerly registered with Wells Fargo Clearing Services LLC has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings of Reed taking part in $3,500,000.00 worth of private securities transactions during the time that he was associated with Wells Fargo. Letter of Acceptance Waiver and Consent No. 2020066246901 (Feb. 19, 2021).
According to the AWC, between 2019 and 2020, six people had been solicited by Reed for purposes of investing in a technology company based in Pasadena California. The investments in this web development and software company took the form of notes and were apparently intended for the company to accumulate capital for operations. Investors were told that they could receive up to 15 percent interest on the notes.
The regulator indicated that $3,500,000.00 in investments had been sold to six investors with Reed’s help. Two of those investors held accounts with Wells Fargo. Those customers had corresponded with Reed concerning their purchases and had been provided with written materials regarding investments. FINRA relayed that investors were advised by Reed to invest in the company, and their transactions had been executed through him. The stockbroker personally guaranteed 50 percent of one person’s investment. He received $191,340.00 in compensation for soliciting purchases from investors and for helping them make purchases.
At no point did Reed tell Wells Fargo that he was engaging in private securities transactions. The securities broker dealer never provided Reed with authorization to partake in those transactions. FINRA determined that Reed’s selling away activities were violative of FINRA Rules 2010 and 3280.
On December 15, 2020, Reed became the subject of a disciplinary action initiated by Arizona Corporation Commission in which the regulator is seeking to revoke Reed’s securities registration supported by accusations of Reed selling away. Case No. S-21132A-20-0370. According to the Commission, Reed executed the sale of unregistered securities and had committed fraud during the period that he was registered with Wells Fargo.
Reed has also been identified in three customer initiated investment related disputes containing allegations of his improper activities while he was employed by securities broker dealers including Fidelity Brokerage Services LLC, Wells Fargo and Coastal Equities. FINRA Public Disclosure confirms that a customer filed an investment related complaint concerning Reed’s conduct where the customer sought $9,000.00 in damages founded on accusations of Reed’s unsuitable investment recommendations during the time that he was associated with Fidelity Brokerage Services.
Reed is referenced in another customer initiated investment related FINRA securities arbitration claim in which the customer requested $300,000.00 in damages based upon allegations that Reed provided unsuitable investment advice at Coastal Equities. FINRA Arbitration No. 17-03293 (May 9, 2019). According to the claim, the customer’s portfolio was not diversified by Reed.
On March 23, 2020, a different customer filed an investment related complaint regarding Reed’s activities where they sought at least $5,000.00 in damages supported by accusations that they were steered towards investing in a security that was not offered by Wells Fargo Advisors.
On April 7, 2020, Reed was terminated by Wells Fargo Clearing Services founded on allegations of him selling away.
Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise. See, e.g., Hunt v. Miller, 908 F.2d 1210 (4th Cir. 1990); Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873 (7th Cir. 1992)(firm liable for agent’s selling away activities); Hollinger v. Titan Capital Corp., 914 F.2d 1564 (9th Cir. 1990)(same); State Security Insurance Co. v. Burgos, 583 N.E.2d 547, 557 (Ill. 1991)(liability for firm where broker acted with apparent authority); Salmon v. New England Securities Corp., FINRA Arb. No. 01-06935 ($1.4 million award against member for associated persons “selling away” third party notes); Sleight v. Centaurus Financial, FINRA Arb. No. 10-00536; Brezden v. Associated Securities Corp., FINRA Arb. No. 07-03054 (reasoned award against member for failure to supervise agent’s selling away activties); Chandler v. FSC Corporation, NASD Arb. No. 05-0443, (reasoned award against member for failure to supervise agent’s unauthorized selling away); Battle v. Northeast Securities, Inc., NASD Arb. No. 06-04110, (same)(reasoned award); Dobison v. Jospehthal, Lyons & Ross, Inc., NASD Arbitration No. 96-00963 (arbitration award against brokerage firm for broker’s selling away of unregistered notes and warrants). Securities regulators have also taken the same approach and routinely hold broker-dealers responsible for the “failure to supervise,” when their representatives engage in this outside activity. In Re DBCC (No. 5) v. Charles E. French, Complaint No. 5940026, May 18, 1995 (sanctions against member for selling away activity of broker); Siriani v. United States Securities & Exchange Commission, 677 F.2d 1284 (9th Cir. 1982); Stoiber v. Securities & Exchange Commission, 161 F.3d 745 (D.C. Cir. 1998).
Reed’s victims ought to consult with qualified counsel to determine their legal rights and responsibilities.
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