The Financial Industry Regulatory Authority has filed a disciplinary complaint against Wedbush Securities Inc. that accuses the firm of violations related to anti-money laundering and systemic supervision. The self-regulatory organization says that from January 2008 through August 2013, Wedbush did not put enough of its resources towards supervisory systems, risk-management controls, and procedures. At the time, the firm was one of the largest market access providers, making millions of dollars from the business.
Because of purported violations, contends FINRA, market-access customers, including non-registered participants, were able to permeate U.S. exchanges and make thousands of trades that could have been manipulative and may have even involved spoofing and manipulative layering. The agency says that even though it was Wedbush’s duty to look out for suspect and possibility manipulative trades, the firm depended mostly on its market access customers to self-report such trading, as well as self-monitor.
FINRA contends that even though Wedbush received notice about the risks involved in its market access business, the firm ‘s supervisory procedures and risk management controls were not reasonably designed to deal with these factors. Wedbush even established incentives for compensation to be based on the value of market customer access trading. FINRA says that Wedbush should have set up, kept up, and enforced satisfactory AML policies and procedures, and it purportedly failed to report suspect transactions.
The disciplinary complaint is the start of FIRNA’s formal proceeding against Wedbush. However, the findings with regards to the allegations made have not been made yet. Now, Wedbush can respond to the complaint. To date, the firm remains adamant that its supervisory procedures and market-access risk procedures were designed to reasonably achieve compliance with regulatory requirements.
In June, the Securities and Exchange Commission filed similar charges against Wedbush, Jeffrey Bell, who is ex-EVP in charge of market access, and Christina Fillhart, a market access division Sr. VP. The Commission’s claims are over alleged violations that would have taken place between 7/11 and 1/13. Wedbush says the trading activities under examination in the SEC’s case didn’t lead to any losses. The firm is challenging the claims.
Please contact our securities lawyers if you suspect you were the victim of financial fraud.
Wedbush Securities Defends Market-Access Risk Management Practices, The Wall Street Journal, August 19, 2014
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