The Financial Industry Regulatory Authority (“FINRA”) has filed a complaint through its Department of Market Regulation and Department of Enforcement against Los Angeles-Based brokerage firm, Wedbush Securities (“Wedbush”). The complaint charges Wedbush with systemic supervisory and anti-money laundering (“AML”) violations from 2008 to 2013. The violations are related to Wedbush’s market access activities for broker-dealers and non-registered market access participants.
Wedbush is accused of failing to ensure appropriate risk management controls, supervisory systems, and AML procedures. This allowed its market access customers to inundate the market ”with thousands of potentially manipulative wash trades and other potentially manipulative trades, including manipulative layering and spoofing.” Wedbush also relied on their customers to self-report and monitor their trading without adequate oversight for “red flag” detection. Moreover, Wedbush failed to tailor its written AML procedures to its market access business. The procedures were described as “almost non-existent and failed to provide for the monitoring, detection, and reporting of suspicious and potentially manipulative transactions by its direct market access customers.”
FINRA alleges that Wedbush received and ignored notices of the risks associated with its market access business and instead incentivized its compliance personnel based on market access customer trading volume. Per FINRA’s complaint, “Wedbush failed to observe high standards of commercial honor and just and equitable principles of trade, in violation of NASD Rule 2110 and FINRA Rule 2010.”
FINRA’s disciplinary complaint process begins with an initial complaint followed by a formal proceeding. The firm or individual can then file a response and request a hearing. Potential outcomes include “a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.” JLG will provide updates on the formal proceedings as details become available.
For further information on this and other related subjects, please contact us at info@jackolg.com or (619) 298-2880.
