Donald Lee Wells, of Seattle, Washington, a stockbroker currently registered with Titan Securities of Addison Texas (CRD No. 131392), has been fined $2,500.00 and subject of cease-and-desist sanctions pursuant to a Consent Order issued by the State of Washington Department of Financial Institutions Securities Division based upon allegations that Wells, inter alia, violated the Securities Act of Washington antifraud provisions due to his part in effecting sales of Life Partners, Inc. settlement agreements to customers. Order No. S-14-1603-16-CO03 (Aug. 2, 2016).
According to the Statement of Charges issued by the Washington Securities Division, $17,000,000.00 worth of Life Partners, Inc. life settlement contracts were offered and sold to residents of Washington between 2009 and 2014, despite the products having been misrepresented and sold by unregistered individuals, including Wells. Order No. S-14-1603-15-SC01 (Mar. 7, 2016). Apparently, these products, which were deemed unregistered securities, contained omissions and misrepresentations that induced customers’ purchases.
Wells reportedly effected at least one of the sales of the life settlement contracts while he had not been registered in Washington. The Statement of Charges cited Wells for selling the products without being properly registered to conduct securities business in the state; conduct violative of RCW 21.20.040.
The Statement of Charges additionally revealed that a multi-level marketing scheme was utilized by Life Partners in their business operations, wherein the firm’s licensees were recruited to sell life settlement contracts offered via the firm as well as tasked with recruiting others to effects sales for the licensees. The licensees were reportedly incentivized by the firm through being compensated up to eight percent commissions from the licensees’ life settlement sales in addition to being compensated up to two percent commissions based upon life settlements sold by individuals that the licensees recruited.
The Statement of Charges stated that twelve percent of the investors’ monies went towards paying those who sold the policies; however, this information was concealed from investors by Wells. Particularly, investors were not apprised that an estimated five percent of the investors’ funds were handed to licensees who did not take part in effecting the sales. Apparently, $49,000.00 in commissions had been paid to Wells in connection with the estimated $824,000.00 worth of life settlements sales to fourteen residents of Washington. Consequently, Wells was alleged by the Securities Division to have violated RCW 21.20.010 based upon making misrepresentations and omissions to investors.
FINRA Public Disclosure revels that on October 23, 2003, a customer filed an investment related written complaint involving Wells’ conduct, in which the customer requested $14,398.00 in damages based upon allegations that Wells, while associated with WMA Securities, Inc., made misrepresentations to the customer concerning the costs pertaining to the customer’s variable universal life insurance contract.
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