Wells Investment Services, sponsor of Wells Real Estate Investment Trust (REIT), has been sanctioned by the National Association of Securities Dealers (NASD) for rewarding broker/dealer reps who sell shares of the REIT with non-cash gifts.

Wells Investment Services and its founder Leo Wells were officially censured and fined $150,000 by the NASD on Monday. The fine prevents the NASD from bringing any future actions against Wells based on the original findings. The NASD also has suspended Leo Wells from carrying out any managerial and/or supervisory duties in the securities arm of the entity.

A spokesman for Wells Real Estate Funds would not comment on the sanctions.

The Wells REIT spent nearly $500 million on new office properties during the third quarter of 2003 alone, and plans to buy $2.5 billion worth of office and industrial properties by the end of the year. Unlike listed REITs that trade on an exchange, the Wells REIT is unlisted and heavily marketed through broker/dealers.

The NASD cited conferences hosted by Wells in 2001 and 2002 where broker/dealer reps who sell Wells products were entertained on the company’s tab. While Wells maintains that these conferences were "strictly educational," the NASD says they were actually lavish affairs.

According to the NASD, Wells paid for reps to attend a dinner at a Civil War fort complete with costumed Civil War heroes, fireworks and skydivers at one Florida conference. Wells also paid for guests’ food, transportation, lodging and golf fees. And at the firm’s 2001 conference in Scottsdale, Ariz., Wells paid a $215 green fee for every person who played golf. The Arizona conference cost Wells $934,000 in the aggregate.

"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 the NASD. "This case makes it clear that NASD will not tolerate any payment of non-cash compensation that runs afoul of those rules."