Securities Lawyers Blog
This post continues our examination of the numerous regulatory actions against Wedbush Securities, Inc. (Wedbush) for its failure to supervise the activities of its employees in various respects.
In November 2014, the SEC’s case was settled with Wedbush and two of its top officials have for market access violations. Wedbush settled by admitting wrongdoing in its actions, paying a $2.44 million penalty, and retaining an independent consultant. Wedbush’s former executive vice president Jeffrey Bell (Bell) and senior vice president Christina Fillhart (Fillhart) settled without admitting or denying the SEC’s findings. Bell and Fillhart agreed to pay a combined total of more than $85,000 in disgorgement and penalties. The SEC order found that Wedbush had inadequate risk controls in place before providing customers with access to the market including some anonymous overseas traders.
In a statement, Andrew Ceresney, director of the SEC Enforcement Division stated that “Wedbush acknowledges that it granted access to thousands of overseas traders without having appropriate safeguards in place.”
Moving to the pending Financial Industry Regulatory Authority’s (FINRA) complaint, the regulatory alleged that Wedbush was one of the securities industry’s largest market access providers including overseas high-frequency, high-volume, algorithmic day-trading firms. Wedbush’s market access helped the firm make millions of dollars. The agency alleged that from January 2008, through August 2013, Wedbush failed to dedicate sufficient resources to ensure appropriate risk management controls and supervisory systems and procedures. FINRA believed that Wedbush’s supervisory failures enabled customers to flood U.S. exchanges with thousands of potentially manipulative trades. As of this date, FINRA’s Wedbush market access case is still pending.
Then the National Adjudicatory Council (NAC) rendered its decision affirming the FINRA hearing decision. FINRA stated that “The information on the Form U4 also is important to member firms, when evaluating whether to hire an employment applicant, and the investing public, who have access to certain disclosure on FINRA’s BrokerCheck, when evaluating a broker.”
To be continued…
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