On March 13, 2019, the U.S. Securities and Exchange Commission (the “SEC”) announced that Wedbush Securities Inc. would be required to pay a $250,000 penalty to settle a claim that Wedbush failed to supervise one of its stockbrokers. The company was also censured as a part of the agreement.
According to the SEC, an investigation began in March 2018, when Wedbush Securities failed to supervise a stockbroker who was involved in a pump-and-dump scheme. The stockbroker was a registered representative with the brokerage firm when he encouraged clients to invest in a “penny-stock scam.” The stockbroker allegedly received kickbacks as an incentive for recommending the stocks to retail investors.
This is not the first regulatory action taken against the brokerage firm. In February 2018, the brokerage firm was fined $1.5 million by FINRA for violating customer protection and net capital rules. According to the SEC, Wedbush Securities not only violated consumer protection rules, but they also maintained inaccurate books and records and failed to establish and maintain supervisory systems.
Earlier, in a 2014 press release, it was announced that Wedbush was fined $2.44 million by the SEC for market access violations. In addition to paying the fine, the broker-dealer firm admitted wrongdoing in the settlement. The SEC found that the company had inadequate risk controls in place for customers before providing market access.