Were you the victim of former Wells Fargo Clearing Services, LLC broker Scott Reed (CRD# 3007033)? It is alleged that while associated with Wells Fargo, he participated in private securities transactions totaling at least $3.5 million without providing prior written notice to the firm.
Scott Reed Regulatory Sanctions
In February 2021, FINRA barred him after he “consented to the sanction and to the entry of findings that he participated in private securities transactions totaling at least $3.5 million without providing prior written notice to or obtaining advanced approval from his member firm. The findings stated that Reed solicited individuals, including at least two firm customers, to invest in securities issued by a software and web development company. Reed participated in these investments away from the firm by providing written materials about the company to investors, and by communicating with them orally, by email and text message about the company and encouraging them to invest. Reed also facilitated the transactions by, among other things, helping investors send or receive transfers of funds. Reed received selling compensation of $191,340 from the company for his role in soliciting and facilitating the investments. Reed also personally invested over $200,000 in the company.”
In December 2020, the Arizona Corporation Commission opened an investigation alleging, “Selling away, sale of unregistered securities, fraud, failure to timely amend Form U-4.”
In February 2021, FINRA barred him indefinitely after he, “consented to the sanction and to the entry of findings that he participated in private securities transactions totaling at least $3.5 million without providing prior written notice to or obtaining advanced approval from his member firm.” FINRA found that he”solicited individuals, including at least two firm customers, to invest in securities issued by a software and web development company. Reed participated in these investments away from the firm by providing written materials about the company to investors, and by communicating with them orally, by email and text message about the company and encouraging them to invest. Reed also facilitated the transactions by, among other things, helping investors send or receive transfers of funds. Reed received selling compensation of $191,340 from the company for his role in soliciting and facilitating the investments.”
In March 2022, the Arizona Corporation Commission Securities Division sanctioned him to a $50,000 civil and administrative penalty and fine and $1,804,901 in restitution, after he “Failed to provide accurate information on U-4s failing to disclose liens (IRS) violating the anti-fraud provisions of the securities act. Selling away from WFA (Pebblekick).”
In November 2023, FINRA suspended him after he “failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.”
In December 2023, the Securities and Exchange Commission permanently barred him related to his participation in recommending penny stocks. According to his BrokerCheck profile, “The Arizona Order revoked Reed’s securities salesman registration and investment adviser representative license in Arizona, required Reed to cease and desist from violations of the Securities Act of Arizona and the Arizona Investment Management Act, required payment of restitution in the amount of $1,804,901, and imposed an administrative penalty in the amount of $50,000.” According to BrokerCheck, “The Arizona Order found that Reed sold securities that were neither registered nor exempt from registration and that had not been approved by the brokerage firm he was associated with. It also found that Reed failed to disclose IRS liens, promised to guarantee a client’s investment without disclosing his own debts that would impair such a guaranty, and failed to disclose that he was selling investments in violation of Arizona law and FINRA’s rules.”
Scott Reed Employment History
He was registered with First Financial Equity Corporation in Scottsdale, Arizona from April to December 2020.
Previously, he was registered with Wells Fargo Clearing Services, LLC in Scottsdale, Arizona, from 2016 to 2020, when he was terminated regarding, “Allegations that registered representative recommended and facilitated investment opportunities in investments sold away from and not offered by Wells Fargo Advisors.” Prior to that, Reed was registered with Coastal Equities, Inc. in Wilmington, Delaware, from 2015 to 2016.
Scott Reed Customer Complaints
In September 2021, a former client of Scott Reed and Wells Fargo filed a FINRA complaint alleging the brokerage firm was negligent in hiring Reed and failed to supervise him, allowing him to engage in systematic fraud and abuse of a customer over the course of several years.
According to the complaint, Reed had the client invest in more than $2 million of unapproved outside investments, including private securities transactions and real estate investments, and took hundreds of thousands of dollars in undisclosed commissions on these investments. It is alleged that the client entrusted Reed with not only his investments, but also access to his bank accounts and personal login information, as well as obtained an original signature to add to documents to “sign” without the client’s approval. A few of the outside, unapproved investments that Reed made on behalf of the client were in Curza Global, Pebblekick, Inc. (and two of its affiliates Mako Studios and Precision Surgical), Flexpak (their landlord Stay Cannonwood), Jarvis Capital Investments, LLC, and Ascensive Creator. Reed gave no explanation about the investments or the associated risks when he made the recommendations to the client.
In 2019, Reed introduced the client to Troy Jarvis, one of Reed’s friends who operated a company called Jarvis Capital Investments, LLC, which raised funds to develop land for a profit. That same year, the client approached Reed about helping him secure a $500,000 loan; the broker responded that he could obtain the loan through Tony but as an investment that would generate 20% returns in a year. Reed did not provide the client with any other written representations about this investment, the risks it entailed, or material disclosures. Jarvis Capital never returned any of the $700,000 that Reed loaned with the client’s money. Instead, in February 2021, Jarvis Capital filed for bankruptcy.
He engaged in illicit and illegal conduct including “selling away” in connection with the sale of Curza Global, Ascensive Creator, Pebblekick, Inc., Mako Studios, and Precision Surgical, and Jarvis Capital Investments, among others, to the client for which Wells Fargo, is legally responsible. Reed’s wrongful conduct, of which Wells Fargo is responsible, caused the client significant damages.
By recommending that the client invest in unapproved private securities transactions, Wells Fargo did not do required due diligence on the investments and they were, therefore, unsuitable. Additionally, he failed to adequately disclose the risks attendant to the investments.
It is also alleged that he communicated through SMS with the client, divulging account numbers, and other sensitive information on this non-secure communication means.
At the time that Wells Fargo hired him in April 2016, he was allegedly struggling financially and had seven figure debt, as well as a history of IRS tax liens (five between 2008 and 2015). Reed never disclosed these liens to FINRA on Form U4 applications or to his prior firms until February 2017. It is alleged that Wells Fargo failed to conduct a background check or credit check, which would have brought to light the numerous IRS tax liens, mounting credit card debt, loans, and multiple lines of credit.
According to public records, Scott Reed solicited at least six individuals, two of which were 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% interest rate. It is alleged that Reed participated in at least $3.5 million in these investments away, also known as selling away, from the firm by providing written materials about the company to investors, and by communicating with them orally, by email and text message about the company and encouraging them to invest. Reed also facilitated the transactions by, among other things, helping investors send or receive transfers of funds. According to the FINRA complaint, “In one case Reed offered to personally guarantee half of an individual’s investment. He received selling compensation of $191,340 from the company for his role in soliciting and facilitating the investments. Reed also personally invested over $200,000 in the company. Reed failed to provide Wells Fargo with prior notice or obtain the firm’s advance approval for his participation in these private securities transactions.”
He has been the subject of five customer complaints between 2010 and 2023, two of which were denied and one was closed without action, according to his CRD report:
September 2021. “Attorney for client complained that financial advisor had the client invest in over $2 million of unapproved outside investments, and took hundreds of thousands of dollars in undisclosed commissions on these investments. (4/13/2017-4/7/2020).” The case was settled for $2,250,000.
December 2017. “The customers claim Mr. Reed recommended unsuitable investments and did not diversify their retirement portfolio.” The customer is seeking $300,000 in damages and the case is currently pending. The complaint took place while Reed was registered with Coastal Equities, Inc. and was regarding equity OTC and oil and gas investments.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Wells Fargo Clearing Services, LLC may be liable for investment or other losses suffered by Scott Reed’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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