The NASD leveled the sanctions at Wells 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."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, when the association's statement was released. "This case makes clear that NASD will not tolerate any payment of non-cash compensation that runs afoul of those rules." But, according to officials of the REIT, "Wells fully disclosed the settlement with the NASD in Prospectus Supplements to all investors, representatives, and broker/dealers in August 2003. The press release issued by the NASD on Oct. 13, 2003, did not raise any new issues. Wells certainly takes this regulatory matter very seriously. We've addressed the issues raised by the NASD, consented to their sanctions and settled our fine."

The statement went on to say that, in making the settlement, Wells is neither "admitting nor denying the allegations. However, it is important to note that the settlement related only to the violation of certain NASD rules related to providing some of the financial planners attending our 2001 and 2002 Educational Conferences with gifts or other non-cash compensation exceeding $100, which is the annual limit. The settlement in no way calls into question the handling of investors' funds or the quality of the Wells real estate operations."