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SEC Action Pending Against Former Wells Fargo Investment Advisor Kenneth Welsh After Allegations of Unauthorized Transactions Leading to Investment Loss

Kenneth Welsh (CRD#: 4657872) is a previously registered Broker and previously registered Investment Advisor.

 

Broker’s Background

 

He entered the securities industry in 2004 and previously worked for Wells Fargo Clearing Services, LLC; Morgan Stanley Smith Barney; Morgan Stanley & Co. Incorporated; and Morgan Stanley DW, Inc..

 

Allegations Of Conduct Leading To Investment Loss

 

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in October 2021, the United States Securities and Exchange Commission filed a pending civil action against Kenneth Welsh. The allegation states, “Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against Defendant Kenneth A. Welsh (“Defendant” or “Welsh”), alleges that this case involves the fraudulent misappropriation of at least $2.86 million by Welsh, who until recently was a financial adviser with a large financial institution registered with the Commission as a broker-dealer and investment adviser (“Financial Institution A”). In his role, Welsh handled investment accounts for the owners of advisory accounts (“clients”) and the owners of brokerage accounts (“customers”). Between at least January 2016 and January 2021 (the “Relevant Period”), Welsh used more than a hundred fraudulent Automated Clearing House (“ACH”) transactions to transfer funds from his clients’ and customers’ accounts to credit card accounts held in the names of his own wife and parents, which he used for his personal benefit. Welsh also caused numerous checks to be fraudulently drawn on his clients’ and customers’ accounts, which he secretly used to buy gold coins and other precious metals and to pay for his personal expenses. None of these transactions were knowingly authorized by his clients or customers, some of whom were elderly and financially unsophisticated. In many cases, Welsh intentionally circumvented Financial Institution A’s policies and procedures to carry out these transfers, including by manually altering checks. Welsh frequently sold securities in his clients’ and customers’ accounts – sometimes only days before the fraudulent transfers – so that cash would be available in the accounts for him to steal. Welsh did not disclose to his victims that the purpose of these securities sales was to facilitate his scheme, rather than to maximize their investment returns and total assets. As a result of the conduct described in this Complaint, Welsh violated Sections 17(a)(1) and 17(a)(2) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.”

 

In addition, Kenneth Welsh has been the subject of 4 customer complaints, including 3 that remain pending, including the following:

 

  • August 2021–”Client verbally complained that the financial advisor assured him that he would see a purchase of stock on his next statement. However, order was GTC and had not filled by the time next statement was issued. (3/24/2020-8/4/2021).” The customer dispute was settled for $21,355.27.
  • June 2021–”Attorney for complainant claims that funds were stolen by the financial advisor. (1/28/2016-1/21/2021).” Damages of $225,000. The customer dispute is pending.
  • June 2021–”Allegations were made that Mr. Welsh may have misappropriated funds from Wells Fargo Clearing Services, LLC clients.” Kenneth Welsh was discharged by Wells Fargo Clearing Services, LLC.
  • June 2021–”Client’s attorney complains that monies were withdrawn from her brokerage account without her authorization in 76 transactions over a 27 month period. (12/1/2018-3/1/2021).” Damages of $1.8M are requested. The customer dispute is pending.
  • April 2021–”Attorney for customer writes that the Financial Advisor is the likely perpetrator of a theft fraud on the client related to the alteration of checks, and payments and transfers from the client’s accounts. (9/11/2014).” The customer dispute is pending.

 

For a copy of Kenneth Welsh’s FINRA BrokerCheck, click here.

 

We Help Investors Recover Investment Losses

 

FINRA regulations require that a customer’s written authorization is required before a broker-dealer can carry out transactions in the customer’s account. In addition, the broker-dealer’s member firm needs to approve the broker-dealer’s authorization. These measures are intended to protect the customer. Discretionary trading allows the broker-dealer to unilaterally decide to buy or sell securities at any price and not have to check with the client first. Exercising discretion without authorization can be costly to investors, and broker-dealers and their member firms, too.

 

Do You Want to Recover Your Investment Losses?

 

 

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.

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