SEC Charges Francisco Herrera in $56 Million Wells Real Estate Investment Scheme – Did Your Financial Adviser Recommend These Promissory Notes?

Call 800-500-4442 if your financial adviser or broker recommended Wells Real Estate Investment promissory notes or another high-yield private investment. Goodman & Nekvasil, P.A. may be able to help you recover investment losses.

Thousands of investors trust their financial advisers and brokers to recommend investments that are suitable for their financial goals and risk tolerance. Unfortunately, not every recommendation satisfies those obligations.

The Securities and Exchange Commission recently filed an enforcement action against Francisco J. Herrera in connection with the alleged sale of approximately $10 million of promissory notes issued by Wells Real Estate Investment, LLC (“Wells”), part of what the SEC describes as a broader $56 million fraudulent securities offering involving approximately 660 investors nationwide. According to the SEC, Herrera personally and through a team of sales agents solicited approximately 190 investors between March 2021 and November 2022.

SEC Alleges Wells Real Estate Operated a $56 Million Fraudulent Securities Offering

According to the SEC’s complaint, Wells Real Estate Investment, LLC, together with its principals, allegedly raised at least $56 million through the sale of promissory notes called “Memoranda of Indebtedness.”

The SEC alleges investors were told that:

• Their money would be used to purchase and improve South Florida real estate.
• The investments were backed by valuable real estate assets.
• Investors could earn attractive returns while receiving the protection of secured investments.

Instead, the SEC alleges the offering operated much differently. Among other allegations, investor funds were allegedly used to:

• Make Ponzi-like payments to earlier investors.
• Pay substantial commissions to sales agents.
• Misrepresent the value and operations of the real estate business.

It is important to remember that these are allegations made by the SEC in a civil enforcement action.

SEC Allegations Against Francisco J. Herrera

The SEC alleges that Francisco J. Herrera:

• Raised approximately $10 million from roughly 190 investors nationwide.
• Managed a network of sales agents marketing the investment.
• Promoted the investment through internet marketing and a Spanish-language radio program.
• Received approximately $488,244 in transaction-based commissions.
• Sold securities without being registered as a broker-dealer or associated with a registered broker-dealer.

Herrera consented, without admitting or denying the SEC’s allegations, to the entry of an injunction prohibiting future violations of federal securities laws. The SEC may seek additional monetary remedies, including disgorgement and civil penalties.

What If Your Financial Adviser or Broker Recommended Wells Real Estate?

Many investors did not purchase these investments directly from promoters.

Instead, they relied on recommendations from:

• Financial advisers
• Registered representatives
• Insurance agents
• Wealth managers
• Investment professionals

If your adviser recommended a high-yield promissory note or private real estate investment like Wells Real Estate Investment, important questions may exist regarding whether that recommendation complied with industry standards.

Those questions may include:

• Was the investment suitable for your financial objectives?
• Were the risks fully disclosed?
• Was adequate due diligence performed before recommending the investment?
• Was the investment concentration appropriate?
• Were commissions or other compensation disclosed?

Financial Professionals Have Important Responsibilities

Registered brokers and investment advisers generally have obligations to recommend investments that are appropriate for their clients after understanding factors such as:

• Investment objectives
• Risk tolerance
• Liquidity needs
• Time horizon
• Financial condition
• Investment experience

Many private placements and promissory note offerings are speculative, illiquid investments that can expose investors to significant losses if the issuer experiences financial distress or if the offering is not operated as represented.

When an investment recommendation fails to satisfy applicable standards of care or disclosure obligations, investors may have legal remedies depending on the facts and circumstances.

Investors May Have Recovery Options

Even when an investment issuer collapses, investor recovery may still be possible.

Potential avenues can include:

• FINRA arbitration claims against brokerage firms.
• Claims involving unsuitable investment recommendations.
• Failure to conduct adequate due diligence.
• Misrepresentations or omissions concerning investment risks.
• Overconcentration in speculative private investments.

Recovery options depend on the specific facts surrounding each recommendation.

Goodman & Nekvasil, P.A. Is Investigating Wells Real Estate Investment Recommendations

If your financial adviser, broker, or wealth manager recommended:

• Wells Real Estate Investment, LLC
• Wells promissory notes
• Memoranda of Indebtedness
• High-yield real estate promissory notes
• Private real estate investments

you may have legal options even if you were not directly solicited by Francisco J. Herrera.

Goodman & Nekvasil, P.A. represents investors nationwide in FINRA arbitration involving unsuitable investment recommendations, private placements, promissory notes, alternative investments and selling away claims.

Call Goodman & Nekvasil, P.A. today at 800-500-4442 for a free, confidential consultation to discuss whether you may be entitled to recover your investment losses.