Former Advisor David Wells Barred for Fraudulent Options Trading

The recent news unfurling about the alleged fraudulent activities of financial advisor David Sheldon Wells of Fifth Third Securities is something every investor should heed. The Securities and Exchange Commission (SEC) has recently barred Wells for purportedly using funds from senior clients’ in secret options trades. The gravity of these allegations and how it affects investors cannot be overstated, making it worthy of our attention and further analysis.

Serious Allegations and Impact on Investors

The details of this situation reveal a fortune lost by unsuspecting investors due in large part to the alleged actions of David Wells. The SEC order, dated June 17th, declares that Wells is barred from associating with any broker, dealer, or investment advisor following a civil actions filed against him.

According to an article by the Chicago Sun Times, Wells has been criminally charged with stealing $683,000 from three clients, two of which are believed to be suffering from dementia. Wells is said to have lied to his clients about investing their money in publicly traded companies, only for it to be expended on personal expenses, lost in high-risk options contracts, and sucked into a shell company under his control. The outcome? Devastated clients and lost trust in the world of financial advice and securities trading.

Having trust in your financial advisor is essential. After all, it’s your hard-earned money on the line. These allegations are a stark reminder of what can go wrong and how it can affect you, as the investor.

Wells’ Background and Previous Complaints

David Wells isn’t a novice in the securities industry. His broker report reveals he was affiliated with Merrill Lynch, Pierce, Fenner & Smith Incorporated from 06/06/2019 to 07/16/2021. Additionally, he worked with FIFTH THIRD SECURITIES, INC from 06/26/2017 – 06/12/2019.

Understanding the FINRA Rule

To better grasp the severity of Wells’ alleged actions, it may be helpful to understand the FINRA (Financial Industry Regulatory Authority) rule that he might have violated. Here’s how it plays out in simple terms:

  • Unauthorized transactions: This so-called offense happens when a broker conducts trades without a client’s permission. This is a big no in the securities industry – unless the client has a discretionary account, it’s the advisor’s duty to obtain approval for every single transaction.

The FINRA arbitration process offers a venue to resolve securities-related disputes and hold malpracticing brokers accountable. Even if the broker is no longer part of the brokerage, the firm may still be held liable – often for failure to adequately supervise their employees.

Consequences and Lessons Learned

In the case of Wells, as the allegations suggest, the consequences are severe. The SEC has barred him from any association with a broker, dealer, or investment advisor. No sweeping under the rug; no second chances. This is the real-deal repercussion for Wall Street bad apples.

Warren Buffet once said, "It takes 20 years to build a reputation and five minutes to ruin it." This is a harsh reality for financial advisors who choose to operate beneath the standards required by law and regulations. In the same breath, it’s an imperative lesson for investors to always monitor their accounts closely, ensure open communication with their advisors, and never be afraid to ask questions about their investments.

Did you know that according to SEC, nearly 50% of enforcement actions in 2018 involved investment advisory issues? Bringing these points home, it becomes more important than ever that as an investor, you must exercise due diligence with financial advice, no matter how seasoned the professional may seem.

To conclude, the situation surrounding David Wells serves as a cautionary tale for investors. Transparency, trust, and adherence to the law are non-negotiable fundamentals in the finance industry. They also play a role in safeguarding your financial future.

To learn more about David Wells’ securities record, you are welcome to visit his FINRA broker check.

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