Investor Alert - Scott Wayne Reed Barred from Securities Industry by FINRA
As recently reported, former Wells Fargo stockbroker Scott Wayne Reed (Reed, CRD# 3007033) of Scottsdale, AZ, has been barred from the securities industry by the Financial Industry Regulatory Authority (FINRA). Through a Letter of Acceptance, Waiver & Consent (AWC) as effective February 19, 2021—in which Mr. Reed neither admitted nor denied FINRA Enforcement’s factual findings—the industry bar concerns Reed’s alleged participation “in private securities transactions totaling at least $3.5 million without providing prior written notice to [Wells Fargo].”
Scott Wayne Reed was a longtime stockbroker with more than two decades of industry experience. Reed first became registered with a FINRA-member brokerage firm in 1999, and thereafter was affiliated with several firms. From April 2016 until his separation from employment in April 2020, Mr. Reed was associated with Wells Fargo in their Scottsdale, AZ branch office. In connection with Reed’s April 2020 discharge from employment, Wells Fargo filed a Form U5 including assertions that Mr. Reed “recommended and facilitated investment opportunities in investments sold away from and not offered by [Wells Fargo].” Furthermore, the U5 also referenced a customer complaint concerning alleged selling away activity by Reed.
According to FINRA’s factual findings, Mr. Reed allegedly “solicited at least six individuals, including at least two Wells Fargo customers, to invest in securities issued by a software and web development company based in Pasadena, California. The securities were notes issued by the company to raise capital for its ongoing operations and for investors to profit from the repayments, which included a 15% rate of interest.” According to FINRA, in at least one instance Reed offered to personally guarantee half of an individual’s investment, and moreover, received aggregate selling compensation of $191,340 from the Pasadena software company.
In instances where a broker engages in the unilateral and independent sale of securities, including, for example, promissory notes issued by private companies, by recommending an investment that is not on his or her brokerage firm’s approved list of securities, then that financial advisor has engaged in “selling away.” FINRA Rule 3040 prohibits a registered representative from selling any security “away” from his or her employer. Typically, the most common securities sold away from brokerage firms include promissory notes, various private placements, in addition to fraudulent offerings.
Pursuant to applicable securities laws and FINRA Rules, brokerage firms like Wells Fargo have a legal duty to ensure that their registered representatives are adequately supervised. In this regard, under FINRA Rule 3010, brokerage firms must “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” And in those instances where a broker is engaged in impermissible selling away activity, the brokerage firm employing that financial advisor may be held liable for its failure to supervise its employee.
Investors who have suffered losses with Scott Wayne Reed, or another financial advisor, may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation to learn more about their legal rights. The attorneys at Giarrusso Law Group LLC have extensive experience with handling all manner of claims on behalf of investors who have been victimized by securities fraud or related misconduct.