News Release

NASD Sanctions Wells Investment Securities and its President for Non-Cash Compensation Rule Violations

Washington, DC — NASD announced today that it has sanctioned Wells Investment Securities, Inc., a sponsor of real estate investment trusts (REITs), for rewarding broker/dealer representatives who sell their REITs with lavish entertainment and travel perquisites, in violation of NASD rules. NASD censured Wells Investment and its President, Leo Wells, and fined them $150,000. NASD also suspended Leo Wells from acting in a principal capacity for one year.

NASD prohibits REIT sponsors from rewarding broker/dealer representatives from other firms with entertainment, gifts or other non-cash compensation. These practices create point-of-sale incentives that may undermine a representative's ability to objectively recommend suitable investments to customers. These payments directly from the REIT sponsor also could interfere with the ability of the representatives' own firms to supervise their sales activities.

"Our non-cash compensation rules help ensure that members and their representatives make recommendations that are in the best interest of their customers," said Mary Schapiro, Vice Chairman of NASD. "This case makes clear that NASD will not tolerate any payment of non-cash compensation that runs afoul of those rules."

Wells Investment, based in Norcross, Georgia, is affiliated with Wells Real Estate Funds, Inc., which is primarily involved in the acquisition and management of office buildings and other commercial properties. These projects are funded through the sale of REIT and direct participation program (DPP) offerings managed by Wells Investment and sold through other broker/dealers. To date, Wells Investment has managed four REIT offerings, which have raised investor proceeds in excess of $3 billion, and 13 DPPs, which have raised investor proceeds in excess of $300 million.

In 2001 and 2002, Wells Investment sponsored conferences in Scottsdale, Arizona, and Amelia Island, Florida, which were attended by broker/dealer representatives from other firms who sold its REIT products. Although Wells Investment represented to NASD that these conferences were "strictly educational," they actually constituted lavish affairs that did not meet the standards of NASD rules. For example, Wells Investment provided broker/dealer representatives with 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. Wells Investment also invited the representatives' guests to many of these events, and paid for the guests' 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.

In settling this matter, Wells Investment and Wells neither admitted nor denied the allegations, but consented to the entry of findings and imposition of sanctions.

Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD's Web site at

NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at