Wedbush Securities Inc.: investment adviser

Item 11 questions answered Yes

These questions cover the firm and its advisory affiliates.

• Has the SEC or the Commodity Futures Trading Commission (CFTC) ever: found you or any advisory affiliate to have been involved in a violation of SEC or CFTC regulations or statutes?
• Has the SEC or the Commodity Futures Trading Commission (CFTC) ever: entered an order against you or any advisory affiliate in connection with investment-related activity?
• Has the SEC or the Commodity Futures Trading Commission (CFTC) ever: imposed a civil money penalty on you or any advisory affiliate, or ordered you or any advisory affiliate to cease and desist from any activity?
• Has any other federal regulatory agency, any state regulatory agency, or any foreign financial regulatory authority: ever found you or any advisory affiliate to have been involved in a violation of investment-related regulations or statutes?
• Has any other federal regulatory agency, any state regulatory agency, or any foreign financial regulatory authority: in the past ten years, entered an order against you or any advisory affiliate in connection with an investment-related activity?
• Has any self-regulatory organization or commodities exchange ever: found you or any advisory affiliate to have been involved in a violation of its rules (other than a violation designated as a "minor rule violation" under a plan approved by the SEC)?
• Has any self-regulatory organization or commodities exchange ever:
• Has any self-regulatory organization or commodities exchange ever: disciplined you or any advisory affiliate by expelling or suspending you or the advisory affiliate from membership, barring or suspending you or the advisory affiliate from association with other members, or otherwise restricting your or the advisory affiliate's activities?
• (1) Has any domestic or foreign court: ever found that you or any advisory affiliate were involved in a violation of investment-related statutes or regulations?

Actions about the firm (84)

1. Aug 8, 2023
   Regulatory Action: CFTC FinalSanctions: Other; N/a · Fine: $6.0M · Begun Aug 8, 2023 · Resolved Aug 8, 2023 · Order · Docket 23-37

   The Commodity Futures Trading Commission (the "commission") alleged that from at least 2018 to the present (the "relevant period"), applicant violated section 4g of the Commodity Exchange Act ("act"), 7 U.S.C. § 6g, and commission regulations ("regulations") 1.31, 1.35, and 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022). The commission alleged the following: Wedbush employees, including those at senior levels, communicated both internally and externally using personal text messages. These written communications were sent and received by Wedbush employees and included messages related to Wedbush's business as a commission registrant that were required to be maintained under commission-mandated recordkeeping requirements. These written business-related communications via unapproved methods generally were not maintained and preserved by Wedbush, and Wedbush generally would not have been able to furnish the communications promptly to a commission representative if and when requested. In addition, the widespread use of unauthorized communication methods by Wedbush's employees to conduct firm business violated Wedbush's own policies and procedures, which prohibited such communications. Wedbush did not maintain adequate internal controls with respect to the use of unapproved communication methods for business-related communications. Because Wedbush failed to implement a diligent supervisory system to ensure compliance with commission recordkeeping requirements and the firm's own policies and procedures, and because the widespread use of unauthorized communication methods resulted in the firm's failure to maintain commission-required records, Wedbush failed to diligently supervise matters related to its business as a commission registrant in violation of regulation 166.3, 17 C.F.R. § 166.3 (2022).

   The firm shall cease and desist from violating section 4g of the act, 7 U.S.C. § 6g, and regulations 1.31, 1.35, and 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022), pay a civil monetary penalty in the amount of $6,000,000, and shall comply with the conditions and undertakings set forth in the offer.

   Applicant entered into a settlement with the CFTC, by which the firm was ordered to: cease and desist from violating section 4g of the act, 7 U.S.C. § 6g, and regulations 1.31, 1.35, and 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022); pay a civil monetary penalty in the amount of $6,000,000; and comply with the conditions and undertakings set forth in the order.

2. Aug 8, 2023
   Regulatory Action: SEC FinalSanctions: Cease and Desist · Fine: $10.0M · Begun Aug 8, 2023 · Resolved Aug 8, 2023 · Order · Docket 3-21550

   The SEC alleged that Wedbush failed to adhere to certain recordkeeping requirements and Wedbush's own policies. Using their personal devices, employees communicated both internally and externally by personal text messages, or other text messaging platforms such as whatsapp ("off-channel communications"). From at least January 2019, Wedbush employees sent and received off-channel communications that related to the business of the broker-dealer and registered investment adviser operated by Wedbush. Respondent did not maintain or preserve the substantial majority of these written communications. Respondent's failure was firm-wide, and involved employees at all levels of authority. Wedbush's supervisors, who were responsible for supervising junior employees, routinely communicated off-channel using their personal devices. Wedbush's widespread failure to implement its policies and procedures that prohibit such communications led to its failure to reasonably supervise its employees within the meaning of section 15(b)(4)(e) of the Exchange Act and section 203(e)(6) of the Advisers Act. During the time period that Wedbush failed to maintain and preserve off-channel communications, Wedbush received and responded to commission subpoenas for documents and records requests in numerous commission investigations. As a result, Wedbush's recordkeeping failures likely impacted the commission's ability to carry out its regulatory functions and investigate violations of the federal securities laws across these investigations. Commission staff uncovered Wedbush's misconduct after commencing a risk based initiative to investigate the use of off-channel and unpreserved communications at broker dealers. Wedbush has initiated a review of its recordkeeping failures and begun a program of remediation. Wedbush will retain an independent compliance consultant to review and assess Wedbush's remedial steps relating to Wedbush's recordkeeping practices, policies and procedures, related supervisory practices, and employment actions.

   The firm is ordered to cease and desist; is censured; shall comply with the undertakings enumerated in the order; andshall pay a civil money penalty in the amount of $10,000,000 to the SEC.

   Applicant enetered into a settlement with the SEC in which it admitted to findings that it: willfully violated section 17(a) of the Exchange Act and rule 17A-4(b)(4) thereunder; willfully violated section 204 of the Advisers Act and rule 2042(a)(7) thereunder; failed reasonably to supervise its employees with a view to preventing or detecting certain of its employees' aiding and abetting violations of section 17(a) of the Exchange Act and rule 17A-4(b)(4) thereunder, within the meaning of section 15(b)(4)(e) of the Exchange Act; and failed reasonably to supervise its employees with a view to preventing or detecting certain of its employees' aiding and abetting violations of section 204 of the Advisers Act and rule 204-2(a)(7) thereunder, within the meaning of section 203(e)(6) of the Advisers Act. Pursuant to the settlement, applicant was: ordered to cease and desist from committing or causing any violations and any future violations of section 17(a) of the Exchange Act and rule 17A-4 thereunder, and cease and desist from committing or causing any violations and any future violations of section 204 of the Advisers Act and rule 204-2 thereunder; censured; ordered to comply with the undertakings enumerated in the order; and fined a civil money penalty in the amount of $10,000,000.

3. Nov 3, 2022
   Regulatory Action: FINRA FinalFine: $850,000 · Begun Nov 3, 2022 · Resolved Nov 3, 2022 · Acceptance, Waiver & Consent(AWC) · Docket 2019062118301

   Without admitting or denying the findings, Wedbush Securities Inc. ("WS") consented to the sanctions and to the entry of findings that WS negligently misrepresented the default status of bonds on customer account statements. The findings stated that WS generated and distributed more than 19,600 monthly account statements to customers that inaccurately represented that municipal or corporate bonds held by customers were making interest or principal payments, when, in fact, the bonds were in default. In each instance, WS received notice that the bonds in question were in default, but WS did not provide such information to the vendor WS used to maintain information about securities held by customers. By making negligent misrepresentations and making and preserving inaccurate account statements, WS violated municipal securities rulemaking board (MSRB) rules G-17 and G-8. The findings stated that WS failed to establish and maintain a supervisory system reasonably designed to review the accuracy of account statements it sent to customers. Although WS received notice when bonds held by customers had defaulted, WS did not have any system to verify that such information was reflected in the system the firm used to maintain information about securities held by customers. WS also did not have a system to review account statements to determine whether WS accurately reported the default status of bonds. WS failed to develop such systems even though WS was aware of red flags that WS may have been reporting such information incorrectly. WS did not take steps to verify that account statements sent to customers accurately reported the default status of bods and continued to misreport such information on customer account statements until it began to revise procedures conferring the accurate reporting of the default status of bonds on account statements. As a result, WS violated MSRB rule G-27. The findings also included that WS failed to deliver required annual privacy notices, margin disclosures, and order execution disclosures. WS used a third-party vendor to provide account statements to customers via mail or electronic delivery through WS's online platform. WS was responsible for providing the vendor with required notices and disclosures to include with account statements delivered to customers. However, WS failed to instruct the vendor to append the required notices and disclosures to the account statements sent electronically to WS's customers, and as a result, WS failed to deliver more than 400,000 required notices and disclosures to approximately 14,900 customers. FINRA found that WS did not have a supervisory system reasonably designed to achieve compliance with its obligation to deliver annual privacy notices, margin disclosures, and order execution disclosures. WS's written supervisory procedures (WSPS) required WS to deliver the annual privacy notices, margin disclosures, and order execution disclosures described above to customers on an annual basis. However, WS did not have any system to verify that such notices were sent to customers who elected to receive materials from WS via its online platform. Instead, WS relied on the vendor to deliver the required annual notices and disclosures to customers, but WS did not take any steps to verify that the vendor had appended the required notices and disclosure to the account statements sent electronically to customers. WS later identified that customers had not been receiving the required notices and disclosures, implemented changes to the delivery

   The firm was censured, fined $850,000, and required to certify that the firm's WSPS and supervisory system are reasonably designed to review the accuracy of account statements sent to customers and to achieve compliance with its obligation to deliver to customers annual privacy notices, margin disclosures, and order execution disclosures.

4. Jan 10, 2022
   Regulatory Action: NYSE ARCA, Inc. FinalFine: $500,000 · Begun Jan 10, 2022 · Resolved Jan 10, 2022 · Acceptance, Waiver & Consent(AWC) · Docket 2019-09-00112

   NYSE ARCA enforcement alleged that: the firm failed to establish and maintain a reasonable supervisory system as to the firm's founder and former president, and certain accounts that he actively traded on behalf of customers, himself, and the firm or its affiliates; the firm continued to allow the founder to trade for these customer accounts along with his personal and proprietary accounts, without adequate process or procedures in place to supervise the order entry, trade executions, or trade allocations in these accounts; the founder and his trading assistant used an order management system that was not frequently used by other members of the firm; the order management system did not provide the ability to assign orders to specific firm affiliate accounts before execution and did not interface directly with the firm's back office system; . The founder's trading assistant manually inputted account allocations for trades executed by him after the trades occurred; the method for determining trade allocations for executed orders in the affiliate accounts remained undocumented and unapproved by the firm, and there continued to be no independent mechanism at the firm to assess the appropriateness of the allocations; the founder's trading activity presented conflicts of interest, and these conflicts were compounded by the fact that the founder regularly engaged in day trading for his personal and proprietary accounts in some of the same securities that he traded on behalf of his customers. In addition, NYSE alleged that as a consequence of failing to allocate orders entered on behalf of the affiliate accounts to specific accounts prior to order execution, the firm continued to inaccurately mark a subset of principal orders in certain proprietary accounts as agency. NYSE acknowledged that the firm made efforts to provide direct lines of supervision over the founder, but alleged that these efforts were delayed and did not reasonably resolve all of the issues identified herein. NYSE charged the firm with violations of NYSE ARCA rules 11.18, 11.1(b), and 9.2010-e.

   The firm was censured and fined $500,000.

5. Dec 15, 2021
   Regulatory Action: SEC FinalSanctions: Cease and Desist · Fine: $1.0M · Begun Dec 15, 2021 · Resolved Dec 15, 2021 · Order · Docket 3-20679

   The Securities and Exchange Commission (the "commission") alleged that from January 2017 through September 2018 (the "relevant period"), the firm engaged in unregistered offers and sales of large blocks of low-priced securities by an offshore customer, in violation of sections 5(a) and 5(c) of the Securities Act of 1933 (the "Securities Act"), as no registration statement was in effect as to the offers and sales of the securities at issue, no exemption from registration was applicable, and the firm failed to conduct a reasonable inquiry. In addition, the commission alleged that Wedbush failed to file suspicious activity reports for certain suspicious transactions that it executed on behalf of its offshore customer during the relevant period, as required by section 17(a) of the Exchange Act and rule 17A-8 thereunder, despite the presence of certain red flags concerning the offshore customer's activities.

   The firm shall cease and desist; is censured; shall comply with the undertakings enumerated in the offer; and shall pay disgorgement of $173,508.40, prejudgment interest of $34,332.16, and a civil penalty of $1,000,000 to the Securities and Exchange Commission.

   The Securities and Exchange Commission (the "commission") accepted an offer of settelment from Wedbush. Pursuant to the settlement offer, Wedbush did not admit or deny the commission's findings that Wedbush willfully violated sections 5(a) and 5(c) of the Securities Act of 1933 (the "Securities Act"), and section 17(a) of the Exchange Act of 1934 (the "Exchange Act"), and rule 17A-8 thereunder. Wedbush was ordered to: cease and desist from committing or causing any violations and any future violations of sections 5(a) and 5(c) of the Securities Act and section 17(a) of the Exchange Act and rule 17A-8 promulgated thereunder; was censured; was ordered to comply with the undertakings enumerated in the offer; and agreed to pay disgorgement of $173,508.40, prejudgment interest of $34,332.16, and a civil penalty of $1,000,000 to the commission.

6. Feb 18, 2020
   Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $30,000 · Begun Feb 18, 2020 · Resolved Feb 18, 2020 · Acceptance, Waiver & Consent(AWC) · Docket 2017053704501

   Due to system issues that arose during its transition between third-party order management systems, the firm failed to transmit roes to OATS. The findings stated that due to the same system issues, the firm transmitted roes containing inaccurate, incomplete, or improperly formatted data to OATS.

   The firm was censured and fined $30,000. Fine paid in full on 2/19/20.

   Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that due to system issues that arose during its transition between third-party order management systems, the firm failed to transmit roes to OATS. The findings stated that due to the same system issues, the firm transmitted roes containing inaccurate, incomplete, or improperly formatted data to OATS.

7. Jan 16, 2020
   Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $90,000 · Begun Jan 16, 2020 · Resolved Jan 16, 2020 · Acceptance, Waiver & Consent(AWC) · Docket 2017053173601

   Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it misreported its short positions in equity securities that must be reported pursuant to FINRA rule 4560. The findings stated that the firm reported a total of 1,911 short positions totaling 23,640,682 shares but should have reported only 1,704 short positions totaling 21,157,936 shares. Thus, it overstated its short positions by a total of 2,482,746 shares and overstated the number of accounts with short positions by 207.

   The firm was censured and fined $90,000.

   Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it misreported its short positions in equity securities that must be reported pursuant to FINRA rule 4560. The findings stated that the firm overstated its short positions and overstated the number of accounts with short positions.

8. Sep 30, 2019
   Regulatory Action: SEC FinalSanctions: Disgorgement · Begun Sep 30, 2019 · Resolved Sep 30, 2019 · Order · Docket 3-19553

   Ia release 5386, September 30, 2019: the Securities and Exchange Commission deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be instituted against Wedbush Securities, inc. ("respondent"). On the basis of this order and respondent's offer, the commission finds that these proceedings arise out of breaches of fiduciary duty and inadequate disclosures by the respondent in connection with its mutual fund share class selection practices and the fees it received. At times during the relevant period, respondent purchased, recommended, or held for advisory clients mutual fund share classes that charged 12B-1 fees instead of lower-cost share classes of the same funds for which the clients were eligible. Respondent received 12B-1 fees in connection with these investments. Respondent failed to disclose in its form ADV or otherwise the conflicts of interest related to (a) its receipt of 12B-1 fees, and/or (b) its selection of mutual fund share classes that pay such fees. During the relevant period, respondent received 12B-1 fees for advising clients to invest in or hold such mutual fund share classes. As a result of the conduct, respondent willfully violated section 206(2) of the Advisers Act.

   Wedbush shall cease and desist from committing or causing any violations and any future violations of section 206(2) of the Advisers Act. Wedbush is censured, shall pay disgorgement of $1,703,194.38 and prejudgment interest of $149,346.59, and shall comply with the undertakings enumerated in the offer of settlement.

   Wedbush has submitted an offer of settlement which the commission has determined to accept. In view of the foregoing, the commission deems it appropriate, and in the public interest to impose the sanctions agreed to in Wedbush's offer. Accordingly, it is ordered that Wedbush shall cease and desist from committing or causing any violations and any future violations of section 206(2) of the Advisers Act. Respondent is censured, shall pay disgorgement of $1,703,194.38 and prejudgment interest of $149,346.59, and shall comply with the undertakings enumerated in the offer of settlement. Wedbush self-reported to the commission the violations discussed in this order pursuant to the division of enforcement's share class selection disclosure initiative ("SCSD initiative"). Accordingly, this order and Wedbush's offer are based on the information self-reported by Wedbush. Wedbush acknowledges that the commission is not imposing a civil penalty based upon Wedbush's self-report in the SCSD initiative.

9. Jun 18, 2019
   Regulatory Action: SEC FinalSanctions: Cease and Desist · Fine: $2.4M · Begun Jun 18, 2019 · Resolved Jun 18, 2019 · Order · Docket 3-19205

   SEC admin releases 33-10650, 34-86133 / June 18, 2019: the Securities and Exchange Commission deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be instituted against Wedbush Securities, inc., ("Wedbush" or "respondent"). On the basis of this order and respondent's offer, the commission finds that these proceedings arise out of Wedbush's improper practices with respect to securities lending transactions involving pre-released american depositary receipts ("ADRS"). Only brokers (or other market participants) that have entered into pre-release agreements with a depositary ("pre-release agreements") can obtain pre-released ADRS from the depositary. The pre-release agreements, consistent with the deposit agreements, require the broker receiving the pre-released ADRS ("pre-release broker"), or its customer on whose behalf the pre-release broker is acting, to beneficially own the ordinary shares represented by the ADRS, and to assign all beneficial rights, title, and interest in those ordinary shares to the depositary while the pre-release transaction is outstanding. In effect, the pre-release broker or its customer becomes the temporary custodian of the ordinary shares that would otherwise have been delivered to the custodian. From at least November 2011 until approximately September 2013, Wedbush was a pre-release broker that obtained pre-released ADRS directly from four depositaries pursuant to pre-release agreements. Contrary to certain provisions in the pre-release agreements and the deposit agreements, associated persons on Wedbush's securities lending desk regularly obtained pre-released ADRS from depositaries and loaned them to counterparties without taking reasonable steps to determine whether the requisite number of ordinary shares was owned and custodied by Wedbush or its counterparties. The result of this conduct was the issuance of ADRS that in many instances were not backed by ordinary shares as required by the deposit agreements. This conduct violated section 17(a)(3) of the Securities Act. In addition, Wedbush failed to establish and implement effective policies and procedures to address whether Wedbush's associated persons complied with the firm's obligations in connection with pre-release transactions, such as determining ownership of the underlying ordinary shares. As a result, Wedbush's supervisory policies and procedures were not reasonably designed and implemented to provide effective oversight of associated persons to prevent and detect their violations of Securities Act section 17(a)(3), and Wedbush failed reasonably to supervise its associated persons within the meaning of section 15(b)(4)(e) of the Exchange Act. As result of the conduct, respondent violated section 17(a)(3) of the Securities Act. Wedbush was responsible for supervising its securities lending desk personnel to address whether they were borrowing and lending pre-released ADRS that were not backed by underlying ordinary shares. Wedbush failed reasonably to fulfill such supervisory responsibilities within the meaning of section 15(b)(4)(e) of the Exchange Act. In determining to accept the offer, the commission considered the cooperation afforded the commission and its voluntary remediation efforts in discontinuing pre-release activity before the start of the s commission's investigation.

   Respondent has submitted an offer of settlement (the offer) which the commission has determined to accept. In view of the foregoing, the commission deems it appropriate in the public interest to impose the sanctions agreed to in the respondent's offer. Accordingly, it is hereby ordered that respondent shall cease and desist from committing or causing any violations and any future violations of section 17(a)(3) of the Securities Act. Respondent is censured. Respondent shall pay disgorgement of $4,869,072 and prejudgment interest of $805,641. Respondent shall pay a civil money penalty of $2,434,536.

10. Mar 13, 2019
    Regulatory Action: SEC FinalSanctions: Other · Fine: $250,000 · Begun Mar 27, 2018 · Resolved Mar 13, 2019 · Order · Docket 3-18411

    SEC admin release 34-82954 / March 27, 2018: the Securities and Exchange Commission ("commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to sections 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Wedbush Securities, inc. ("Wedbush" or "respondent"). The division of enforcement alleges that Wedbush failed reasonably to supervise one of its registered representatives who engaged in manipulative trading activity of penny stocks over multiple years, as detailed below. Wedbush was aware of certain aspects of the registered representative's activity in 2012 and 2013 but its supervisory policies and implementation systems failed reasonably to guide staff on how to investigate the activity. Specifically, in late 2012 and early 2013, the registered representative's supervisors: (1) reviewed an email outlining her role in fraudulent transactions involving penny stocks; (2) received copies of two FINRA arbitrations filed by her customers outlining serious allegations of her role in their investments in the same penny stock issuers; (3) learned of a FINRA inquiry into her personal trading in one of those penny stock issuers; and (4) learned of a separate FINRA inquiry into the allegations underlying the customer arbitrations. Wedbush had no clear process for how to handle red flags of potential market manipulation. As a result of the conduct described, Wedbush failed reasonably to supervise an individual with a view to preventing and detecting violations of sections 17(a)(1) and (3) of the Securities Act, sections 9(a)(2) and 10(b) of the Exchange Act and rule 10B-5(a) and (c) thereunder.

    Wedbush is censured and shall pay a civil money penalty in the amount of $250,000.

    Respondent has submitted an offer of settlement (the "offer") which the commission has determined to accept. In view of the foregoing, the commission deems it appropriate to impose the sanctions agreed to in respondent's offer. Accordingly, it is hereby ordered that respondent is censured and shall pay a civil money penalty in the amount of $250,000. On May 31, 2018, the former president of Wedbush was succeeded by two new co-presidents. Since that time, the co-presidents have taken certain remedial measures to improve Wedbush's supervision of its registered representatives.

11. Dec 10, 2018
    Regulatory Action: Nasdaq Stock Market FinalFine: $15,000 · Begun Dec 10, 2018 · Resolved Dec 10, 2018 · Acceptance, Waiver & Consent(AWC) · Docket 2016051145501

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to maintain a continuous two-sided trading interest during regular market hours, at prices within certain percentages away from the national best bid or offer ("NBBO"). The findings stated that this resulted from the firm failing to properly submit a market maker peg order for a security in which the firm made a market. The findings also stated that the firm's supervisory system was not reasonably designed to achieve compliance with Nasdaq quoting obligations. Specifically, the firm's written supervisory procedures failed to state, which reports the designated supervisor(s) review for quoting obligations and failed to establish a procedure to review the firm's entire quoting obligation on a given day. Rather, the firm only reviewed the firm's actual quotes, thus it did not review securities in which it had a quotation obligation but failed to properly quote.

    The firm was censured, fined $15,000, and required to revise its written supervisory procedures (WSPS).

12. Apr 13, 2018
    Regulatory Action: CME Group FinalFine: $250,000 · Begun Apr 13, 2018 · Resolved Apr 13, 2018 · Settled · Docket 16-CH-1607

    On April 12, 2018, the CME clearing house risk committee reviewed the firm's risk based examination report dated March 9, 2018 and charged the firm with violating CBOT rules 951., 970.a., 971.a., 971.A.1. And 980.b.

    The fine of $250000 was paid.

13. Apr 11, 2018
    Regulatory Action: FINRA FinalFine: $40,000 · Begun Apr 11, 2018 · Resolved Apr 11, 2018 · Acceptance, Waiver & Consent(AWC) · Docket 2014041261702

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish, maintain, and enforce written policies and procedures that were reasonably designed to prevent trade-throughs of protected quotations in national market system (NMS) stocks that did not fall within any applicable exception, and if relying on an exception, were reasonably designed to assure compliance with the terms of the exception. The findings stated that the firm inaccurately appended print protection modifiers to transaction reports submitted to the FINRA/Nasdaq trade reporting facility (FNTRF) identifying the transactions as qualifying for an exception or exemption from SEC rule 611 of regulation NMS. The findings also stated that for stopped orders that the firm purportedly had executed pursuant to SEC rule 611(b)(9), it failed to document on an order-by-order basis the specified price agreed to by the customer and the time at which the stop price was determined.

    The firm was censured, fined $40,000, and required to revise its WSPS.

14. Apr 10, 2018
    Regulatory Action: CBOE BZX Exchange, Inc. FinalFine: $5,000 · Begun Mar 12, 2018 · Resolved Apr 10, 2018 · Acceptance, Waiver & Consent(AWC) · Docket 2014041261701

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to implement policies and procedures to reasonably avoid displaying, or engaging in a pattern or practice of displaying, any quotations that locked or crossed a protected quotation, and any manual quotations that locked or crossed a quotation previously disseminated pursuant to an effective national market system plan. The findings stated that the firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations and BZX rules concerning locking or crossing protected quotations. Specifically, with respect to its direct market access clients, the firm's system did not include written supervisory procedures providing for the following: (1) the identification of the persons responsible for supervision with respect to the applicable rules; (2) a statement of the supervisory steps to be taken by the persons identified as responsible for ensuring compliance with the applicable rules; (3) a statement of the frequency with which such person should take such steps; and (4) a statement as to how the completion of the steps included in the written supervisory procedures should be documented.

    The firm was censured and fined $5,000. If this settlement is made pursuant to BZX rule 8.8, the decision in this matter is final 20 business days after the issuance of the decision. Therefore, this AWC became final April 10, 2018.

15. Mar 9, 2018
    Regulatory Action: New York Stock Exchange FinalFine: $30,000 · Begun Feb 8, 2018 · Resolved Mar 9, 2018 · Acceptance, Waiver & Consent(AWC) · Docket 2016-07-01063

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to implement adequate written procedures and supervisory systems and controls reasonably designed to achieve compliance with NYSE rule 123c with respect to certain of the firm's proprietary trading units. The findings stated that the firm failed to comply with the requirements governing the cancellation of market-on-close/limit-on-close (moc/loc) and closing offset (CO) orders when firm traders cancelled three moc/loc or CO orders between 3:45 P.M. And 3:58 P.M. That were not the result of legitimate order errors. In addition, the firm failed to provide complete and/or accurate information in response to requests by NYSE regulation. Specifically, the firm provided incomplete, incorrect and/or misleading information on material issues to this matter, including its relationship to certain clients and its related supervisory systems. The firm also provided an explanation of how other cancellations were entered on the NYSE that was later determined to not be complete and/or accurate.

    The firm was censured and fined $30,000.

16. Feb 5, 2018
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $1.5M · Begun May 27, 2016 · Resolved Feb 5, 2018 · Decision & Order of Offer of Settlement · Docket 2012033105901

    The firm was named a respondent in a FINRA complaint alleging that it willfully violated section 15(c) of the Exchange Act of 1934, Exchange Act rule 15C3-3(b) (1) thereunder, and FINRA rule 2010 by creating or increasing deficits in the number of securities required to be in the firm's possession or control. The complaint alleges that the firm willfully violated section 15(c) of the Exchange Act of 1934, Exchange Act rule 15C3-3(e) thereunder, and FINRA rule 2010 by failing to accurately calculate its customer reserve formula and adequately fund its customer reserve account in accordance with the customer protection rule, which resulted in hindsight deficiencies. The complaint also alleges that the firm failed to establish and maintain a supervisory system, including written procedures, reasonably designed to achieve compliance with both the possession and control requirement and the customer reserve requirements of the customer protection rule.

    The firm was censured, fined $1.5 million and required to submit an undertaking pursuant to which the firm's president, or his successor-in-interest, shall within 30 days of the completion of the firm's implementation of the recommendations received from the independent consultant to be retained by the firm in connection with the order instituting administrative and cease-and-desist proceedings, pursuant to sections 15(b) and 21c of the Securities Exchange Act of 1934 and section 203(e) of the Investment Advisers Act of 1940, making findings, and imposing remedial sanctions and a cease-and- desist order, entered concurrently herewith with the U.S. Securities and Exchange Commission, certify in writing to FINRA that, as of the date of the certification, the firm has in place policies, systems and procedures to address and correct the violations described in this offer of settlement.

    Without admitting or denying the allegations, the firm consented to the sanctions and to the entry of findings that in 30 separate instances, the firm created and/or increased deficits in its segregation requirement through deliveries or returns of securities. The findings also stated that on 14 occasions the firm improperly calculated its customer reserve formula, which, on eight occasions, resulted in hindsight deficiencies between $945,000 and $77 million. The findings also included that the firm failed to establish and maintain a supervisory system, including written procedures, reasonably designed to achieve compliance with both the possession or control requirement and the customer reserve account requirement of the customer protection rule. Under the terms of the offer, the firm has also consented, without admitting or denying the allegations and to the entry of findings and violations arising out of examinations conducted by FINRA in 2014, 2015 and 2016, as described below, and to the imposition of the sanctions contained herein. The additional findings are as follows: from November 2015 through March 2016, the firm held multiple positions in certificates of deposit (CDS) issued by major financial institutions for which there was no "ready market," for over five business days, but failed to deduct the value of each position exceeding 30% of the firm's tentative net capital. The firm created and maintained inaccurate books and records that inaccurately reported the amounts the firm was required to maintain in its customer reserve account. Additionally, inaccurately reported its net capital.

17. Feb 5, 2018
    Regulatory Action: SEC FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $1.0M · Begun Feb 5, 2018 · Resolved Feb 5, 2018 · Order · Docket 3-18357

    SEC admin release 34-82630, ia release 40-4852 / February 5, 2018: the Securities and Exchange Commission ("commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to sections 15(b), and 21c of the Securities Exchange Act of 1934 ("Exchange Act"), and section 203(e) of the Investment Advisers Act of 1940 ("Advisers Act") against Wedbush Securities Inc. ("Wedbush" or "respondent"). The commission finds that these proceedings involve Wedbush's violations of Exchange Act rule 15C3-3, known as the customer protection rule ("rule"). The customer protection rule requires broker-dealers to safeguard both the cash and securities of their customers so that customer assets can be promptly returned if the firm fails. In order to do so, a broker-dealer is required to periodically (daily, weekly, or monthly depending on the firm) calculate the net amount of cash it owes its customers, and deposit that amount into a segregated bank account known as the "reserve account." Between September 2014 and January 2015, Wedbush's weekly rule 15C3-3 calculations to determine the net amount that should have been deposited into the reserve account included a significant error, resulting in weekly reserve account deficiencies ranging from approximately $10 million to $193 million out of a total reserve account requirement that ranged between $1.5 billion and $1.7 billion. When the error was uncovered, Wedbush was required to immediately deposit an additional $133 million into its reserve account, which created a significant liquidity challenge for Wedbush. Wedbush's failure to properly fund its reserve account also caused it to violate section 17(a) (1) of the Exchange Act and rule 17A-5(a) thereunder, because it included inaccurate information in its financial and operational combined uniform single reports ("focus reports"). As a result of the conduct described, Wedbush willfully violated section 15(c)(3) of the Exchange Act and rule 15C3-3 thereunder, which require carrying broker-dealers to maintain a reserve of funds or qualified securities in an account at a bank that is at least equal in value to the net cash owed to customers. Wedbush also willfully violated section 17(a)(1) of the Exchange Act and rule 17A-5(a) thereunder by filing focus reports that contained incorrect information on the reserve formula because of the calculation error.

    Without admitting or denying the accusations Wedbush is censured and ordered to cease and desist from committing or causing any violations and any future violations of sections 15(c)(3) and 17(a)(1) of the Exchange Act, and rules 15C3-3 and 17A-5(a) thereunder. Wedbush is ordered to pay disgorgement of $275,851 along with prejudgment interest of $28,346 and ordered to pay a civil money penalty in the amount of $1,000,000 plus post-order interest to the Securities and Exchange Commission. Wedbush is also ordered to comply with certain undertakings.

    Without admitting or denying the accusations respondent has submitted an offer of settlement (the "offer") which the commission has determined to accept. Wedbush willfully violated sections 15(c)(3) and 17(a)(1) of the Exchange Act and rules 15C3-3 and 17A-5(a) thereunder. It is ordered that Wedbush is censured and shall cease and desist from committing or causing any violations and any future violations of sections 15(c)(3) and 17(a)(1) of the Exchange Act, and rules 15C3-3 and 17A-5(a) thereunder. Wedbush is ordered to pay disgorgement of $275,851 along with prejudgment interest of $28,346 and ordered to pay a civil money penalty in the amount of $1,000,000 plus post-order interest to the Securities and Exchange Commission. Wedbush is also ordered to comply with certain undertakings.

18. Sep 27, 2017
    Regulatory Action: FINRA FinalSanctions: Other · Fine: $400,000 · Begun Sep 27, 2017 · Resolved Sep 27, 2017 · Acceptance, Waiver & Consent(AWC) · Docket 2011030598001

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to transmit 548,669,414 reportable order events (ROES) to the order audit trail system (OATS) during the review period. The findings stated that the firm failed to detect a technology issue that affected its reporting system, which caused the ROES generated by one of its sponsored access clients not to be transmitted to OATS. The firm failed to enforce its written supervisory procedures which specified that the firm would review its OATS web interface reports and data to ensure that all ROES were being submitted to OATS. Based on the volume of non-reporting and the extended period over which it occurred, the firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with the securities laws and regulations, and FINRA rules regarding OATS. The findings also stated that in 171 instances, the firm accepted a short sale order from another person, or effected a short sale for its own account, without first borrowing the security, or entering into a bona-fide arrangement to borrow the security, and had a fail-to-deliver position at a registered clearing agency in such security that was not closed out in accordance with the requirements of paragraph (a) of SEC rule 204. In four instances, the firm executed a short sale order and failed to properly mark the order as short. The firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations, concerning rule 204 of Regulation SHO. The findings also included that for 61 settlement dates, the firm reported 171 short interest positions totaling 4,706,076 shares when it should have reported 90 short interest positions totaling 747,865 shares. The violations resulted from a coding error that caused the firm to erroneously include short interest positions from certain accounts in the short interest reports the firm submitted to FINRA. The firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations, and FINRA rules, concerning short interest position reporting.

    The firm was censured and fined a total of $470,000, of which $400,000 is payable to FINRA. The remaining $70,000 will be paid to NYSE ARCA equities, inc. in a related matter.

    In determining sanctions, FINRA considered that as of July 6, 2015, the firm had terminated the sponsored access business that resulted in the OATS violations cited herein. In unrelated FINRA matters, the firm retained an independent consultant and revised its written supervisory procedures related to OATS as of September 2016 and had revised its Regulation SHO written supervisory procedures as of March 10, 2015. Thus, the sanctions in this matter do not include an undertaking because of this conduct.

19. Sep 26, 2017
    Regulatory Action: NYSE ARCA, Inc. FinalSanctions: Other · Fine: $70,000 · Begun Sep 26, 2017 · Resolved Sep 26, 2017 · Decision & Order of Offer of Settlement · Docket 2012033328201

    A FINRA hearing officer considered an offer of settlement and consent entered into between FINRA on behalf of NYSE ARCA inc. and the firm. The firm entered into an offer of settlement and consent for the sole purpose of settling this disciplinary proceeding, without adjudication of any issues of law or fact, and without admitting or denying any allegations or findings referred to in the offer of settlement. The hearing officer accepts the offer of settlement and consent and issues this decision. The findings stated that this matter involves the firm's failure to comply with supervision requirements of NYSE ARCA equities rule 6.18 regarding the close-out requirements of rule 204 of Regulation SHO, Securities Exchange Act of 1934 (rule 204). The firm's supervisory system was not reasonably designed to ensure compliance with the requirements of rule 204(a) of Regulation SHO. Specifically, the firm's allocation strategy contravened regulatory principles and rule 204, because it did not inherently ensure fails were being properly closed out and or allocated in accordance with rule 204(d) of Regulation SHO, and thus resulted in an increase in the number of securities that were required to be closed out, resulting in recurring fails. This failure resulted in the firm effecting short sale transactions for certain correspondent broker-dealers that increased the failure to deliver positions. Finally, the firm also failed to properly close out a fail that resulted from one of its retail clients' trading activity. The findings also stated that the firm's operational processes and systems were not reasonably designed to ensure compliance with the requirements of rule 204 of Regulation SHO. Specifically, the operational reports the firm used to identify fails did not include certain exchange-listed securities subject to the close-out provisions of rule 204(a). As a result, the firm failed to identify and properly close-out fails in these securities, as required by rule 204(a) of Regulation SHO.

    The firm was censured and fined $70,000.

20. Aug 18, 2017
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $110,000 · Begun Aug 18, 2017 · Resolved Aug 18, 2017 · Acceptance, Waiver & Consent(AWC) · Docket 2014039939801

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it engaged in trading unit aggregation but failed to ensure that individual traders were assigned to only one aggregation unit (AGU) at any time, that AGU's had operated autonomously and engaged in separate trading strategies without regard to other trading units, and that AGU's had not coordinated trading activities or interacted or shared order or position information. The findings stated that the firm employed four individuals who acted as both a trader in one AGU and as a trader or supervisor in another AGU, including two individuals who served in such dual capacities. Such arrangement is improper because it could result in the coordination of trading strategies or trading based upon position or trading information of the other AGU. The findings also stated that the firm failed to provide adequate supervision to monitor for compliance with rule 200(f) of Regulation SHO. Aggregation of a unit's independent net position prior to each sale limits the potential for abuse associated with coordination among units. The firm's written plan of organization reflected unclear strategies, strategies that overlapped for multiple agus and traders that also acted as traders or supervisors in other agus. The firm also lacked adequate written supervisory procedures (WSPS) and supporting documentation reflecting its creation and approval of agus and its supervision of traders. The findings also included that the firm transmitted to OATS reports that contained inaccurate, incomplete, or improperly formatted data. The firm failed to report to OATS non-market making proprietary orders and erroneously submitted post-trade allocations as reportable order events to OATS. FINRA found that the firm failed on 26 occasions to provide written notification disclosing to its customer that a transaction was executed by the firm at an average price, that transaction details were available upon request, and/or its capacity in the transaction. FINRA also found that the firm inaccurately marked short sell orders as long. In addition, FINRA determined that the firm accepted a short sale order in an equity security from another person, or effected a short sale in an equity security for its own account, without borrowing the security, or entering into a bonafide arrangement to borrow the security or having reasonable grounds to believe that the security could be borrowed so that it could be delivered on the date delivery is due and documenting compliance with rule 203(b)(1) of Regulation SHO

    The firm was censured and fined $110,000.

21. Mar 31, 2017
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Begun Mar 31, 2017 · Resolved Mar 31, 2017 · Acceptance, Waiver & Consent(AWC) · Docket 2015046456601

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that failed to report information regarding purchase and sale transactions effected in municipal securities to the real-time transaction reporting system (RTRS) in the manner prescribed by municipal securities rulemaking board (MSRB) rule G-14 RTRS procedures and the RTRS users manual. The findings stated that specifically, the firm failed to report information about such transactions within 15 minutes of time of trade to an RTRS portal. The findings also stated that the firm failed to enforce its written supervisory procedures (WSPS) concerning trade reporting in municipal securities. Specifically, the firm did not conduct a "daily to weekly" review of the firm's order management system cancel and late trade reports as stated in its WSPS.

    The firm was censured and fined $20,000.

    On 3/31/2017 the firm was censured and fined $20,000.

22. Dec 20, 2016
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Begun Dec 20, 2016 · Resolved Dec 20, 2016 · Acceptance, Waiver & Consent(AWC) · Docket 2015046471201

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed, within 10 seconds after execution, to transmit last sale reports of transactions in NMS securities to the FINRA/Nasdaq trade reporting facility (FNTRF) and failed to report the correct time of execution to the FNTRF in that it failed to append the stop stock time on last sale reports of transactions in NMS securities. The findings stated that the firm failed to adequately supervise its trade reporting and input of trade data to the FNTRF.

    Without admitting or denying the findings, the firm consented to a censure and fine of $20,000.

    The firm was censured and fined $20,000. The fine was paid January 18 2017.

23. Dec 20, 2016
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Begun Dec 20, 2016 · Resolved Dec 20, 2016 · Acceptance, Waiver & Consent(AWC) · Docket 2015046471201

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed, within 10 seconds after execution, to transmit last sale reports of transactions in NMS securities to the FINRA/Nasdaq trade reporting facility (FNTRF) and failed to report the correct time of execution to the FNTRF in that it failed to append the stop stock time on last sale reports of transactions in NMS securities. The findings stated that the firm failed to adequately supervise its trade reporting and input of trade data to the FNTRF.

    Without admitting or denying the findings, the firm consented to a censure and fine of $20,000.

    The firm was censured and fined $20,000. The fine was paid January 18 2017.

24. Oct 12, 2016
    Regulatory Action: Chicago Board Options Exchange FinalFine: $25,000 · Begun Jun 13, 2016 · Resolved Oct 12, 2016 · Decision & Order of Offer of Settlement · Docket 16-0018/ 20160501291

    It is alleged that Wedbush: (I)failed to mark numerous orders with the proper origin code; (II) failed to maintain accurate books and records as a result of mismarking numerous agency orders with principal order origin codes; (III) failed to implement adequate supervisory policies and procedures related to origin code marking on CBSX; and failed to supervise to assure compliance with the order origin code marking requirements on CBSX. (Violation of exchange rules 4.2, 6.51 and 15.1, and section 17(a) of the Exchange Act and rule 17A-3 thereunder)

    A $25,000 fine and a censure.

25. Sep 29, 2016
    Regulatory Action: Tennessee Securities Division FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s); Censure · Fine: $30,000 · Begun Sep 29, 2016 · Resolved Sep 29, 2016 · Consent · Docket 16-017

    Wedbush Securities in January 1986 through June 1987 cleared trades for correspondent broker-dealers Tennessee clients without being registered as a broker-dealer in the state as required by Tennessee comp. R. & Regs. 0780-4-3.01(1)(e).

    Wedbush Securities was fined $30,000 and agreed to a period of probation for two years.

26. Sep 29, 2016
    Regulatory Action: Tennessee Securities Division FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s); Censure · Fine: $30,000 · Begun Sep 29, 2016 · Resolved Sep 29, 2016 · Consent · Docket 16-017

    Wedbush Securities in January 1986 through June 1987 cleared trades for correspondent broker-dealers Tennessee clients without being registered as a broker-dealer in the state as required by Tennessee comp. R. & Regs. 0780-4-3.01(1)(e).

    Wedbush Securities was fined $30,000 and agreed to a period of probation for two years.

27. Jun 17, 2016
    Regulatory Action: ICE Futures U.S., Inc. FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Begun May 18, 2016 · Resolved Jun 17, 2016 · Settled · Docket 2015-058

    The BCC subcommittee determined Wedbush may have violated exchange rule 6.15(a) in which it failed to report large trader positions in multiple instances January 2015 through April 2015 and September 2015 through October 2015. Also, Wedbush may have violated exchange rule 4.01 in which it failed to have an adequate process or procedure in place.

    Wedbush paid a fine of $20,000 and agreed to cease and desist from future violations of exchange rule 6.15(a)

28. May 18, 2016
    Regulatory Action: FINRA FinalFine: $1.0M · Begun Jun 4, 2014 · Resolved May 18, 2016 · Decision · Docket 2012034934301

    The firm was named a respondent in a FINRA complaint alleging that it failed to provide trade data requested by the SEC and FINRA, commonly known as "blue sheets," for more than 160,000 trades that it executed for correspondent firms, and failed to properly submit blue sheets requested by the SEC and FINRA for more than 5.6 million trades. The firm knew or should have known that its blue sheet submissions to the SEC were inaccurate and incomplete. The complaint alleges that these failures were due in part to the firm's lack of an adequate audit system providing for accountability of its blue sheet submissions and its lack of a supervisory system and procedures for supervision reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable FINRA and NASD rules for electronic blue sheet reporting requirements. The firm knew or should have known that its audit system did not provide for accountability of its blue sheet submissions. As a result, the firm willfully violated section 17(a) of the Securities Exchange Act of 1934 and rules 17A-4(f)(3)(v), 17A-4(j) and 17A-25 thereunder, and FINRA rule 2010.

    The firm was fined $1,000,000 and ordered to pay costs of $9,085.21.

    Extended hearing panel decision rendered August 27, 2015 wherein the firm was fined in the aggregate $1,000,000 and ordered to pay costs in the amount of $9,085.21. On September 21, 2015, the firm appealed the decision to the nac. On May 18, 2016, the firm withdrew its appeal of the extended hearing panel decision. Accordingly, the matter is now final.

29. Mar 23, 2016
    Regulatory Action: International Securities Exchange FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $90,000 · Begun Mar 1, 2016 · Resolved Mar 23, 2016 · Acceptance, Waiver & Consent(AWC) · Docket 2012-070

    During the review period, Wedbush reported (I) approximately 118,785 instances to the large options positions report ("LOPR") without the tax id or tax id type. (II) approximately 51,385 instances to the LOPR with the "account address city" field incorrectly populated with "no city"; (III) approximately 62,482 instances with the "account street address" field incorrectly populated with "street not found" and (IV) 188 instances for one account with the incorrect "account name" field. Also during the review period, Wedbush also failed to report the correct effective date to the LOPR for an unknown number of positions; a sample reviewed by staff during the period between January 19, 2010 & March 28, 2013 revealed that Wedbush had reported approximately 3,144 positions without the correct effective date as a result of errors related to the firms third party vendors processing of certain trades. During the review period between January 19 & June 7, 2012, Wedbush also failed to report to LOPR approximately 100,2326 instances that were connected to the firms joint back office account. The conduct described above violated ise rule 415(a). During the review period, Wedbush failed to have adequate supervisory systems and controls in place, including a separate system of follow-up and review and written policies & procedures, reasonably designed to achieve compliance with the exchanges options positions reporting requirements. The conduct above violated ise rule 401.

    Wedbush fined $90,000

30. Feb 25, 2016
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $337,500 · Begun Feb 25, 2016 · Resolved Feb 25, 2016 · Acceptance, Waiver & Consent(AWC) · Docket 2010024386603

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it served as the clearing firm for a correspondent broker-dealer that was engaged in the trading of various exchange-traded funds (ETFS) and the firm was an authorized participant of various ETFS. The findings stated that the client broker-dealer engaged in a systemic, recurring and cyclical pattern of 'naked' redemption and short sale trading activity in ETFS that resulted in substantial, repeated failures to deliver the ETFS by the firm within the continuous net settlement system. The extent and magnitude of the client broker-dealer's naked redemption/short selling in the subject ETFS was significant. The firm failed to ascertain whether the client broker-dealer beneficially owned sufficient ETF shares to cover its redemption requests. In fact, the firm was aware, or should have been aware, that the client broker-dealer routinely was placing ETF redemption orders with the firm when it was insufficiently long the ETF shares, resulting in repeated fails to deliver consistent with the client broker-dealer's strategy to maintain a short position in ETFS. In addition, the firm failed to adequately follow up on the client broker-dealer's repeated fails to deliver that resulted from its cyclical, repetitive pattern of naked redemption orders and short sales of ETFS in the secondary market to identify and take steps to address the misconduct. The findings also stated that the firm failed to establish, implement and enforce reasonable supervisory procedures, including written supervisory procedures, during the review period specific to compliance with rule 204 of Regulation SHO, or specific to the firm's activities as an authorized participant in certain ETFS, to reasonably ensure those activities complied with applicable securities laws, rules and regulations. While the firm maintained certain desk procedures and a corporate policy concerning close outs of fails to deliver and procedures regarding the processing of ETF creation/redemption orders during the review period, they were operational in nature. The firm's written supervisory procedures did not address either rule 204 of Regulation SHO or the firm's activities as an authorized participant at all, let alone provide for supervisory reviews to ensure fails were being appropriately identified and addressed, close-out procedures were being followed and firm personnel tasked with carrying out the firm's obligations and responsibilities as an authorized participant were both familiar with, and carrying out, such duties consistent with the firm's authorized participant agreements and applicable securities laws, rules and regulations. The firm facilitated its client broker- dealer's violations of rule 204 of Regulation SHO in repeatedly effectuating, as an authorized participant and clearing firm, the client broker-dealer's naked redemption orders and ETF short sell orders, without conducting adequate inquiry into whether the client broker-dealer owned or had full legal authority and legal and beneficial right to redeem ETF shares and taking sufficient follow-up actions to address the client broker-dealer's recurring, cyclical fails.

    The firm was censured and fined $337,500 to be paid to FINRA, and undertakes to revise the firm's written supervisory procedures.

31. Feb 25, 2016
    Regulatory Action: Nasdaq Stock Market FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $337,500 · Begun Feb 25, 2016 · Resolved Feb 25, 2016 · Acceptance, Waiver & Consent(AWC) · Docket 2010024386602

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it served as the clearing firm for a correspondent broker-dealer (the client broker-dealer) that was engaged in the trading of various exchange-traded funds (ETFS). The findings stated that the firm's client broker-dealer engaged in a systemic, recurring and cyclical pattern of 'naked' redemption and short sale trading activity in ETFS that resulted in substantial, repeated failures to deliver the ETFS by the firm within the continuous net settlement system (CNS). The firm allocated the fails to deliver associated with the foregoing redemption and trading activity to the client broker-dealer, which, upon receiving buy-in notices, the client broker-dealer typically took action to close out the fail by submitting an order to create units in the ETFS on t+6, even though its redemption and short sale activities that resulted in the fails to deliver did not qualify as bona fide market making under rule 204 of Regulation SHO. In addition, the client broker-dealer would typically re-establish the fail position by redeeming shares of the ETF through the firm, or executing sales of the ETF that cleared through the firm the next trading day. The extent and magnitude of the client broker-dealer's naked redemption/short selling in the subject ETFS was significant. The client broker-dealer submitted at least 255 naked redemption orders through the firm in 11 of the 14 ETFS included in the review, totaling 295,950,000 shares for which the client broker-dealer was not long the requisite number of shares of the ETF and otherwise did not have the full legal authority and legal and beneficial right to tender those shares at the time the client broker-dealer submitted its redemption orders. The client broker-dealer's chronic fails to deliver in ETF shares resulting from its above naked redemption/trading strategy also constituted a significant factor in the 14 ETFS under review being classified as threshold securities under Regulation SHO for sustained timeframes. The findings also stated that the firm failed to ascertain whether the client broker-dealer beneficially owned sufficient ETF shares to cover its redemption requests. In fact, the firm was aware, or should have been aware, that the client broker-dealer routinely was placing ETF redemption orders with the firm when it was insufficiently long the ETF shares, resulting in repeated fails to deliver consistent with the client broker-dealer's strategy to maintain a short position in ETFS. In addition, the firm failed to adequately follow up on the client broker-dealer's repeated fails to deliver that resulted from its cyclical, repetitive pattern of naked redemption orders and short sales of ETFS in the secondary market to identify and take steps to address the misconduct. The findings also included that the firm failed to establish, implement and enforce reasonable supervisory procedures, including written supervisory procedures, during the review period specific to compliance with rule 204 of Regulation SHO, or specific to the firm's activities as an authorized participant in certain ETFS, to reasonably ensure those activities complied with applicable securities laws, rules and regulations. As a result of its conduct, the firm violated Nasdaq rules 2110 and 3010, and violated Nasdaq rule 2110 by facilitating its client broker-dealer's violations of rule 204 of Regulation SHO.

    The firm was censured, fined $337,500 shall be paid to Nasdaq and undertakes to revise its written supervisory procedures.

32. Dec 1, 2015
    Regulatory Action: FINRA FinalFine: $100,002 · Begun Aug 21, 2014 · Resolved Dec 1, 2015 · Decision & Order of Offer of Settlement · Docket 2009020634401

    The firm was named a respondent in a FINRA complaint alleging that it failed to have a supervisory system reasonably designed to achieve compliance with the securities laws and FINRA rules, and NASD rule 3010(b), by failing to establish, maintain and enforce written procedures to supervise the types of business in which it engaged. The complaint alleges that despite numerous red flags that should have alerted the firm to the types of potential manipulation by its market access customers, the firm's written supervisory procedures (WSPS) continued to lack reasonable or any procedures and reviews for various types of price manipulation, including layering, spoofing, pre-arranged trading, auto-execution, excessive order entry and marking-the-close, and contained fundamental flaws with respect to established reviews. The firm failed to establish, maintain and enforce WSPS reasonably designed to supervise the types of business in which it was engaged and to supervise the activities of registered representatives, registered principals and other associated persons that were reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules, including SEC rule 15C3-5. The complaint also alleges that the firm failed to establish, maintain and enforce adequate anti-money laundering (AML) policies and procedures and failed to reasonably monitor, detect, and cause the reporting of potentially suspicious activity by its market access customers. The firm failed to develop and implement AML policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations promulgated thereunder. Although the firm had AML policies and procedures in place, they were not tailored to its market access business and therefore could not reasonably be expected to detect and cause the reporting of suspicious transactions. The firm missed or otherwise failed to investigate numerous red flags of suspicious activity related to its market access business and clients. This failure was at least partly the result of the firm's failure to adopt clear lines of responsibility for AML compliance regarding the market access business. The complaint further alleges that the firm failed to establish, document and maintain a system of risk management controls and supervisory procedures reasonably designed to systematically manage the regulatory and other risks of providing market access. The firm failed to appropriately control the risks associated with providing its customers with market access so as not to jeopardize the firm's and other market participants' financial condition and the integrity of the trading on the securities markets. The firm also failed to ensure that it had adequate risk management controls to prevent the entry of erroneous orders, by rejecting orders that exceed appropriate price or size parameters, on an order-by-order basis or over a short period of time. The firm failed to reasonably allocate, by written contract, after a thorough due diligence review, control over specific regulatory risk management controls and supervisory procedures to a broker-dealer customer. The firm failed to adequately review the performance of broker-dealers to whom it has allocated certain regulatory responsibilities. The firm knowingly and deliberately created a disincentive for its employees to conduct rigorous and effective monitoring and curtail potential violative activity and profited handsomely from its abject failure to reasonably monitor and detect thousands of instances of

    The firm is fined $100,002, in this proceeding.

    Without admitting or denying the allegations, the firm consented to the sanctions and to the entry of findings that the firm failed to establish, document and maintain a system of risk management controls and supervisory procedures reasonably designed to systematically manage the regulatory and other risks of providing market access. As a result, the firm willfully violated section 15(c)(3) of the Securities Exchange Act of 1934 and rule 15C3-5.

33. Dec 1, 2015
    Regulatory Action: Nasdaq Stock Market FinalSanctions: Other · Fine: $566,666 · Begun Apr 10, 2015 · Resolved Dec 1, 2015 · Decision & Order of Offer of Settlement · Docket 2011026311802

    The firm was named a respondent in a FINRA complaint alleging that its supervisory systems and procedures governing market access were deficient in numerous ways. The complaint alleges that despite numerous red flags that should have alerted the firm to the types of potential manipulation by its market access customers, its WSPS continued to lack reasonable or any procedures and reviews for various types of price manipulation, including layering, spoofing, pre-arranged trading, auto- execution manipulation, excessive order entry and marking-the-close, and contained fundamental flaws with respect to established reviews. The firm failed to establish, maintain and enforce WSPS reasonably designed to supervise the types of business in which it was engaged and to supervise the activities of registered representatives, registered principals and other associated persons that were reasonably designed to achieve compliance with applicable securities laws, regulations and Nasdaq rules, including rule 15C3-5. The complaint also alleges that the firm failed to appropriately control the risks associated with providing its customers with market access so as not to jeopardize the firm's and other market participants' financial condition and the integrity of the trading on the securities markets, as required by SEC rule 15C3-5. The firm failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of providing market access, as required by rule 15C3-5(b). The firm failed to ensure, as required by rule 15C3-5(c), that it had in place appropriate regulatory risk management controls and supervisory procedures. The firm failed to ensure that it had adequate risk management controls to prevent the entry of erroneous orders, by rejecting orders that exceed appropriate price or size parameters, on an order-by-order basis or over a short period of time. It failed to ensure that its regulatory risk management controls and supervisory procedures were under its direct and exclusive control, as required by rule 15C3-5(d). It failed to reasonably allocate, by written contract, after a thorough due diligence review, control over specific regulatory risk management controls and supervisory procedures to a broker-dealer customer. The firm failed to adequately review the performance of broker-dealers to whom it has allocated certain regulatory responsibilities. The firm failed to establish, document and maintain a system for regularly reviewing the effectiveness of the risk management controls and supervisory procedures as required by rule 15C3-5(e). Thus, as detailed, the firm willfully violated section 15(c)(3) of the Exchange Act of 1934, and rule 15C3-5 thereunder. The complaint further alleges that the firm established a compensation system rife with potential conflicts of interest. The firm thereby knowingly and deliberately created a disincentive for its employees to conduct rigorous and effective monitoring and curtail potential violative activity. Moreover, despite its receipt of numerous regulatory inquiries as well as exchange-generated reports identifying hundreds of wash trades on a daily basis, the firm took no steps to curtail wash trades. Through such knowing and deliberate conduct, it enabled artificially elevated, distorted and misleading trading volumes of multiple securities across multiple exchanges. The firm handsomely profited from its abject failure to reasonably monitor and detect thousands of instances of potential

    The firm was censured and fined a total of $566,666 in connection with this proceeding

    Without admitting or denying the allegations, the firm consented to the sanctions and to the entry of findings that as required by SEC rule 15C3-5(d)the firm failed to reasonably allocate, by written contract, after a thorough due diligence review, control over specific regulatory risk management controls and supervisory procedures to a broker-dealer customer. The firm failed to establish, document and maintain a system for regularly reviewing the effectiveness of the risk management controls and supervisory procedures as required by SEC rule 15C3-5(e). As a result, the firm willfully violated section 15(c)(3) of the Securities Exchange Act of 1934, and SEC rule 15C3-5 thereunder, and violated Nasdaq rule 2110 and Nasdaq rule 2010a.

34. Dec 1, 2015
    Regulatory Action: NYSE ARCA, Inc. FinalSanctions: Other · Fine: $566,666 · Begun Oct 1, 2015 · Resolved Dec 1, 2015 · Decision & Order of Offer of Settlement · Docket 2011026311803

    The department of market regulation of the Financial Industry Regulatory Authority (FINRA), on behalf of NYSE regulation, inc., alleges: the firm committed egregious and systemic supervisory violations in its business of providing market access to broker- dealers and non-registered market participants (market access customers) to multiple market centers, including the NYSE ARCA marketplace. Without dedicating sufficient resources to ensure appropriate regulatory risk management controls and supervisory systems and procedures, Wedbush enabled its market access customers to flood the exchanges with thousands of potentially manipulative wash trades, and other potentially manipulative trading activity, such as layering and spoofing. Wedbush reaped millions of dollars from its market access business, but failed to devote sufficient resources, including qualified and adequately trained compliance personnel, surveillance systems and controls, to detect and prevent potential manipulative activity by its market access customers. The firm failed to establish, maintain, and enforce supervisory systems and procedures that were reasonably designed to achieve compliance with securities laws, rules and regulations, including NYSE ARCA equities rules addressing the monitoring, detection, and prevention of suspicious and potentially manipulative trading. The firm also failed to establish, document and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the regulatory and other risks of having and providing market access and failed to have reasonable procedures to ensure that all authorized traders of its market access customers comply with all NYSE ARCA equities rules. The firm created incentives that rewarded compliance personnel with monthly compensation based on market access customers' trading volume, for which they had responsibility to oversee, and failed to monitor and detect thousands of instances of potentially manipulative trading by recidivist customers, despite repeated red flags. The firm failed to use due diligence to learn essential facts relative to market access customer accounts and failed to periodically review market access customer accounts for irregularities. The firm also failed to take reasonable steps to avoid submission by its market access customers of orders that resulted in locked and crossed markets and failed to reasonably supervise activity by its market access customers with respect to locked and crossed markets, order protection rules and compliance with NYSE ARCA equities rule 7.37(e)(2) and regulation NMS rule 611(c). As a result of its conduct, the firm willfully violated section 15(c)(3) of the Securities Exchange Act of 1934 and market access rule 15C3-5 and regulation NMS rule 611(c) and violated NYSE ARCA equities rules 6.1(b), 6.18, 6.18(a)-(c), 6.2, 7.30(b), 7.37(e)(2), 9.2(a), 9.2(b), 9.2(b)(4) and 2010.

    Censure and fine of $566,666

    A hearing officer at FINRA considered an offer of settlement and consent entered into between FINRA's department of market regulation on behalf of NYSE regulation, inc. and Wedbush Securities, inc. the offer of settlement and consent was submitted for the purpose of settling this disciplinary proceeding without adjudication of any issues of law or fact and without admitting or denying any allegations or findings referenced in the offer. The offer was submitted in conjunction with the settlements of three other disciplinary actions FINRA brought against Wedbush on behalf of FINRA and two other self- regulatory organizations, which disciplinary actions include substantially the same allegations and charges as those in the complaint in this action. The firm is censured and fined $566,666. The firm settled the related FINRA and exchange complaints for a total fine of $1,800,000, which is allocated as follows: $566,666 each to NYSE ARCA, bats exchange, inc., and Nasdaq, and $100,002 to FINRA. In setting the fine amount, the parties took into consideration that the firm paid $2.44 million to the Securities and Exchange Commission and agreed to hire an independent consultant in settlement of similar claims.

35. Dec 1, 2015
    Regulatory Action: Bats Z-Exchange, Inc. FinalSanctions: Other · Fine: $566,666 · Begun Oct 1, 2015 · Resolved Dec 1, 2015 · Decision & Order of Offer of Settlement · Docket 2011026311804

    The department of market regulation of the Financial Industry Regulatory Authority ("FINRA"), on behalf of Bats exchange, inc. ("Bats", "BZX", or the "exchange"), alleges: the firm committed egregious and systemic supervisory violations in its business of providing direct market access and sponsored access (together "market access") to broker-dealers and non-registered market participants ("market access customers") to multiple market centers, including BZX. Without dedicating sufficient resources to ensure appropriate regulatory risk management controls and supervisory systems and procedures, Wedbush enabled its market access customers to flood the exchanges with thousands of potentially manipulative wash trades, and other potentially manipulative trading activity, such as layering and spoofing. Wedbush reaped millions of dollars from its market access business, but failed to devote sufficient resources, including qualified and adequately trained compliance personnel, surveillance systems and controls, to detect and prevent potential manipulative activity by its market access customers. The firm failed to establish, maintain, and enforce supervisory systems and procedures that were reasonably designed to achieve compliance with securities laws, rules and regulations, including BZX rules, addressing the monitoring, detection, and prevention of suspicious and potentially manipulative trading. The firm also failed to establish, document and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the regulatory and other risks of having and providing market access. The firm created incentives that rewarded compliance personnel with monthly compensation based on market access customers' trading volume, for which they had responsibility to oversee, and failed to monitor and detect thousands of instances of potentially manipulative trading by recidivist customers, despite repeated red flags. As a result of its conduct, the firm willfully violated section 15(c)(3) of the Securities Exchange Act of 1934 and rule 15C3-5 thereunder and violated BZX rules 3.1, 5.1 and 5.4.

    Censure and fine of $566,666

    An offer of settlement and consent entered into between FINRA's department of market regulation on behalf of Bats Z-Exchange and Wedbush Securities, inc. the offer of settlement and consent was submitted for the purpose of settling this disciplinary proceeding without adjudication of any issues of law or fact and without admitting or denying any allegations or findings referenced in the offer. The offer was submitted in conjunction with the settlements of three other disciplinary actions FINRA brought against Wedbush on behalf of FINRA and two other self-regulatory organizations, which disciplinary actions include substantially the same allegations and charges as those in the complaint in this action. The firm is censured and fined $566,666. The firm settled the related FINRA and exchange complaints for a total fine of $1,800,000, which is allocated as follows: $566,666 each to NYSE ARCA, Bats exchange, inc., and Nasdaq, and $100,002 to FINRA. In setting the fine amount, the parties took into consideration that the firm paid $2.44 million to the Securities and Exchange Commission and agreed to hire an independent consultant in settlement of similar claims.

36. Sep 22, 2015
    Regulatory Action: FINRA FinalSanctions: Other · Fine: $20,000 · Begun Sep 22, 2015 · Resolved Sep 22, 2015 · Acceptance, Waiver & Consent(AWC) · Docket 2013035824401

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it transmitted to OATS reports that contained inaccurate, incomplete, or improperly formatted data. The findings stated that specifically, the firm submitted reports with inaccurate "LVS qty", failed to submit route reports, submitted an order execution report for an agency routed order, submitted an inaccurate order receipt time, failed to submit order information, and failed to submit the appropriate account type code. The findings also stated that the firm failed to properly memorialize OATS order information on the memoranda of brokerage orders. Specifically, the firm failed to memorialize immediate or cancel, or intermarket sweep order special handling codes, the peg special handling code, and the customer instructions regarding displaying the limit order on the order ticket. The findings also included that the firm failed to provide written notification disclosing relevant information to its customers. Specifically, the firm failed to disclose that the transactions were executed at average prices, that transaction details were available upon request, its capacity in the transactions, and that it charged commissions or commission equivalents. FINRA found that the firm's supervisory system failed to provide for supervision reasonably designed to achieve compliance with respect to SEC rule 204. Specifically, the firm's written supervisory procedures (WSPS) did not include the identification of the person responsible for supervision, the supervisory steps and reviews to be taken by the appropriate supervisor, the frequency of the supervisory reviews, and how the supervisory reviews should be documented.

    Censure and fine of $20,000

37. Sep 21, 2015
    Regulatory Action: Bats Z-Exchange, Inc. FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Resolved Sep 21, 2015 · Acceptance, Waiver & Consent(AWC) · Docket 2010024913201

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that during the period between January 19, 2010 and February 28, 2011, the firm failed to report numerous reportable options positions because the firm had failed to properly aggregate and report positions to the options clearing corporation (OCC) large options positions report (LOPR) for approximately 39 accounts related to five acting in concert (AIC) groups that acted in concert. This conduct violated chapter xviii, section 18.10 of the BZX exchange rules. During the period between January 19, 2010 and February 28, 2011, the firm failed to have an adequate supervisory system in place to ensure the accuracy and completeness of the reporting of its options positions, including in-concert reporting, to the LOPR. This conduct violated chapter xviii, rule 18.2(a) (1) of the BZX exchange rules. During the period between January 19, 2010 and the present, the firm has failed to have adequate written supervisory procedures (WSPS) regarding in-concert reporting to the LOPR and to ensure the accuracy and completeness of its daily LOPR submissions. Specifically, the firm's WSPS fail to reflect: (I) the step(s) that the firm's designated person responsible to ensure compliance with applicable rules should take to ensure compliance therewith; (II) how often such person(s) should take such step(s); and (III) how such steps are documented. This conduct violated chapter v, rules 5.1, 5.3, and 5.4 of the BZX exchange rules.

    Censured, fine of $20,000 and undertaking to revise the WSP's

38. May 12, 2015
    Regulatory Action: NYSE ARCA, Inc. FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $7,500 · Resolved May 12, 2015 · Acceptance, Waiver & Consent(AWC) · Docket 2013036228501

    The firm violated NYSE ARCA equities rule 2.24 and SEC rule 17A-3, by failing to record on its trade blotters accurate execution times for 226 transactions in six separate securities.

    The firm is censured and fined $7,500.

    A FINRA hearing officer considered an offer of settlement and consent entered into between FINRA on behalf of NYSE regulation, inc. and the firm. Without admitting or denying any allegations or findings, the hearing officer accepted the offer of settlement and consent and issued a decision on May 12, 2015.

39. Apr 10, 2015
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $17,500 · Begun Apr 8, 2015 · Resolved Apr 10, 2015 · Acceptance, Waiver & Consent(AWC) · Docket 2013036214001

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to properly mark sell orders as long or short and, as a result, also failed to report the transactions in reportable securities to the FINRA trade reporting facility with the correct symbol indicating whether the transactions were long or short.

    The firm was censured and fined $17,500.

40. Dec 9, 2014
    Regulatory Action: FINRA FinalFine: $67,500 · Begun Dec 9, 2014 · Resolved Dec 9, 2014 · Acceptance, Waiver & Consent(AWC) · Docket 2011026107603

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it transmitted reports to the order audit trail system (OATS) that contained inaccurate, incomplete, or improperly formatted data. The findings stated that the firm failed to provide written notifications disclosing to its customers that transactions were executed at average prices, that transaction details were available upon request, its capacity in the transactions, and/or that it charged commissions or commission equivalents. The firm failed to prepare accurate books and records. The firm failed to properly mark proprietary sell orders as long and failed to mark sale orders as short and as a result, the firm failed to report these transactions to various exchanges with the correct symbol indicating whether the transactions were long or short. The firm failed to report transactions in trade reporting and compliance engine (TRACE)-eligible securitized products to TRACE within 15 minutes of the time of execution. The findings also stated that the firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations, and/or FINRA rules. The firm's written supervisory procedures (WSPS) failed to provide for one or more of the four minimum requirements for adequate WSPS regarding accurately identify buy, short sale, and long sale information and clearly erroneous filings, and failed to provide evidence of supervisory review regarding accuracy of books and records. The findings also included that the firm allowed a registered representative to engage in proprietary trading and routing customers' orders for execution on behalf of the firm without being properly registered as a general securities representative and equity trader.

    The firm was censured, fined $67,500 and undertakes to revise its WSPS.

41. Nov 20, 2014
    Regulatory Action: SEC FinalSanctions: Cease and Desist · Fine: $2.4M · Begun Jun 6, 2014 · Resolved Nov 20, 2014 · Order · Docket 3-15913

    The SEC alleges the firm willfully violated section 15(c)(3) of the Exchange Act and rule 15C3-5 thereunder because it did not maintain exclusive control over risk management controls in sponsored access trading platforms; did not have a system of risk management controls and supervisory procedures that was reasonably designed to ensure compliance with all regulatory requirements, including those that must be satisfied on a pre-order entry basis; did not have controls and procedures reasonably designed to restrict access to market access trading systems to persons and accounts pre-approved and authorized by the firm; did not establish, document, and maintain a system for regularly reviewing the effectiveness of its risk management controls and supervisory procedures relating to market access; and did not conduct an adequate review of its market access controls and procedures. The firm willfully violated section 17(a) of the Exchange Act and rule 17A-8 thereunder because it failed to file reports of suspicious trading activity in connection with is market access business. The firm willfully violated section 17(a) of the Exchange Act and rule 17A-4(b)(4) thereunder because it failed to preserve originals or copies of communications containing trading instructions relating to isos submitted by its customers under a firm MPID through third- party trading platforms. The firm willfully violated rule 203(b)(1) of Regulation SHO because it allowed sponsored access customers to submit short-sale orders for securities that were not easy to borrow without first otherwise locating shares to borrow. The firm willfully violated rule 611(c) of regulation NMS because it allowed sponsored access customers to submit isos without the firm taking reasonable steps to ensure that it satisfied the requirements for sending isos.

    Ordered that: respondent Wedbush cease and desist from committing or causing any violations and any future violations, is censured and shall, within ten (10) days of the entry of this order, pay a civil money penalty in the amount of $2,447,043.38 to the Securities and Exchange Commission. Respondent Wedbush shall comply with the undertakings enumerated in the offer of settlement. In connection with the conduct described, Wedbush acted willfully.

    It is further ordered that the administrative law judge shall issue an initial decision no later than 300 days from the date of service of this order. SEC admin release 34-73652, ia release 40-3971 / November 20, 2014: respondent Wedbush has submitted an offer of settlement that the commission has determined to accept. Respondent admits the facts and acknowledges that its conduct violated the federal securities laws, admits the commission's jurisdiction over it and the subject matter of these proceedings, and consents to the entry of this order making findings and imposing remedial sanctions and a cease-and-desist order pursuant to sections 15(b) and 21c of the Securities Exchange Act of 1934 and section 203(e) of the Investment Advisers Act of 1940 as to Wedbush Securities Inc. in view of the foregoing, the commission deems it appropriate in the public interest to impose the sanctions agreed to in respondent Wedbush's offer. Accordingly, pursuant to sections 15(b) and 21c of the Exchange Act and section 203(e) of the Advisers Act, it is hereby ordered that: respondent Wedbush cease and desist from committing or causing any violations and any future violations of sections 15(c)(3) and 17(a) of the Exchange Act; rules 15C3-5, 17A-4, and 17A-8 thereunder; rule 203(b)(1) of Regulation SHO; and rule 611(c) of regulation NMS. Respondent Wedbush is censured. Respondent Wedbush shall, within ten (10) days of the entry of this order, pay a civil money penalty in the amount of $2,447,043.38 to the Securities and Exchange Commission. Respondent Wedbush shall comply with the undertakings enumerated in the offer of settlement.

42. Nov 3, 2014
    Regulatory Action: SEC FinalSanctions: Cease and Desist · Fine: $67,200 · Begun Nov 2, 2014 · Resolved Nov 3, 2014 · Order · Docket 3-16240

    SEC admin release 34-73506 / November 3, 2014: the Securities and Exchange Commission deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to sections 15(b), 15b(c)(2) and 21c of the Securities Exchange Act of 1934 against Wedbush Securities Inc. ("Wedbush" or "respondent"). In anticipation of the institution of these proceedings, respondent has submitted an offer of settlement which the commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the commission, or to which the commission is a party, and without admitting or denying the findings herein, except as to the commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, respondent consents to the entry of this order instituting administrative and cease-and-desist proceedings pursuant to sections 15(b), 15b(c)(2) and 21c of the Securities Exchange Act of 1934, making findings, and imposing remedial sanctions and a cease-and-desist order. On the basis of this order and respondent's offer, the commission finds that: these proceedings involve the sale of non-investment grade or "junk" bonds issued by the commonwealth of Puerto Rico ("Puerto Rico") by Wedbush, a registered broker-dealer and municipal securities dealer, to customers in amounts below the minimum denomination of the issue. Rule G-15(f) promulgated by the municipal securities rulemaking board ("MSRB") prohibits dealers from effecting customer transactions in municipal securities in amounts below the minimum denominations of the issues. Minimum denominations are generally intended to limit sales of municipal securities to retail customers for whom such bonds may not be suitable, but the proscriptions of rule G-15(f) apply to all transactions with customers, regardless of whether the securities are suitable for the customer. In March 2014, Wedbush violated MSRB rule G-15(f) by executing three sales transactions in the Puerto Rico bonds with customers in amounts below the $100,000 minimum denomination of the issue established by the issuer, Puerto Rico, and specified in the official statement. The limited exceptions provided under MSRB rule G-15(f) for customer transactions in municipal securities below the minimum denomination of an issue did not apply to these transactions. Respondent solicited all of the customer sales transactions. As a result of the conduct described above, respondent willfully violated MSRB rule G-15(f). As a result of respondent's willful violations of MSRB rule G-15(f), respondent willfully violated section 15b(c)(1) of the Exchange Act.

    Accordingly, it is hereby ordered that: respondent cease and desist from committing or causing any violations and any future violations of section 15b(c)(1) of the Exchange Act and MSRB rule G-15(f) . Respondent is censured. Respondent shall, within seven (7) days of the entry of this order, pay a civil money penalty in the amount of $67,200. Respondent willfully violated MSRB rule G-15(f). As a result of respondent's willful violations of MSRB rule G-15(f), respondent willfully violated section 15b(c)(1) of the Exchange Act.

    In determining to accept the offer, the commission considered remedial acts promptly undertaken by respondent. After it became aware that it had effected customer transactions in the 2014 bonds below the minimum denomination of the issue, respondent cancelled the transactions. Respondent will undertake to review the adequacy of its existing policies and procedures relating to compliance with MSRB rule G-15(f). After that review, respondent will make such changes as are necessary to effect compliance with MSRB rule G-15(f), including adopting new policies and procedures or supplementing existing policies and procedures. Respondent will implement these policies and procedures, and conduct training as to the policies and procedures and compliance with MSRB rule G-15(f). Respondent will inform commission staff no later than six (6) months after the entry of this order that it has complied with the above undertakings.

43. Oct 22, 2014
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $20,000 · Resolved Oct 22, 2014 · Acceptance, Waiver & Consent(AWC) · Docket 2010021544001

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that in 16 instances, the firm had a fail-to-deliver position at a registered clearing agency in an equity security that resulted from sales of a security that the seller was deemed to own pursuant to §242.200 of Regulation SHO and intended to deliver once all restrictions on delivery had been removed, and did not close the fail-to-deliver position by purchasing or borrowing securities of like kind and quantity within the timeframe prescribed by rule 204(a)(2) of Regulation SHO.

    The firm was censured and fined $20,000.

    The firm was censured and fined $20,000 on 10/22/2014

44. May 15, 2014
    Regulatory Action: Nasdaq Stock Market FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $10,000 · Begun May 15, 2014 · Resolved May 15, 2014 · Acceptance, Waiver & Consent(AWC) · Docket 2011026107601

    Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it entered orders into the Nasdaq market center that failed to correctly indicate whether the orders were a buy, short sale or long sale. As a result, the firm violated Nasdaq rule 4755.

45. Dec 19, 2013
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $95,000 · Resolved Dec 19, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2012032742901

    NYSE rules 123c, 132(a), 342(a) and (b), 2010, Wedbush Securities Inc. failed to comply with requirements governing the cancellation of market-on-close (MOC), limit- on-close (LOC) and closing offset (CO) orders on the NYSE, in that various direct market access and sponsored access (market access) customers to which the firm provided access to trade directly on the NYSE via a firm mnemonic had cancelled orders on the NYSE between 3:45 P.M. And 3:58 P.M. That were not the result of legitimate order errors. Firm market access customer trading via a firm mnemonic tested the connectivity of its electronic systems to the NYSE's systems in a manner inconsistent with established procedures by entering and sending to the NYSE LOC orders and cancellations, over different trade dates to purchase two stocks at a limit price of $.01, when the stocks had traded at $15 and $40, respectively; such orders were entered in the guise of actual orders without denoting each message as a test order or cancellation. By permitting its market access customer to test its electronic order routing systems' connectivity to the NYSE's systems in a manner inconsistent with established NYSE procedures, the firm failed to observe high standards of commercial honor and just and equitable principles of trade in the conduct of its business. The firm had no written supervisory procedures or systems, including a separate system of follow-up and review, reasonably designed to ensure compliance with NYSE rule 123c with respect to MOC, LOC and CO orders entered and cancelled by firm market access customers. The firm, through two market access customers which were non-member organizations unaffiliated with the firm, submitted for comparison or settlement numerous transactions via a firm mnemonic that were erroneously marked with a "p" account type indicator code, when such orders should have been marked with an "a" account type indicator code. The firm had no written supervisory procedures or systems, including a separate system of follow-up and review, reasonably designed to ensure compliance with NYSE rule 132 with respect to account type indicator codes on orders entered on the NYSE by firm market access customers.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; therefore, the firm is censured, fined $95,000 and required to revise its supervisory systems regarding a separate system of follow-up and review, reasonably designed to ensure compliance with NYSE rule 123c with respect to moc,loc and co orders entered and cancelled by firm market access customers and a separate system of follow-up and review, reasonably designed to ensure compliance with NYSE rule 132 with respect to account type indicator codes on orders entered on the NYSE by firm market access customers within 30 business days of acceptance of this AWC by FINRA's office of disciplinary affairs. Fine was paid January 14, 2014.

46. Oct 16, 2013
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $95,000 · Begun Oct 16, 2013 · Resolved Oct 16, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2009018146101

    MSRB rules G-8, G-14, and G-27, FINRA rules 2010 and 2110(a), and NASD rule 2320: the firm failed to execute orders fully and promptly and in transactions for or with a customer, the firm failed to use reasonable diligence to ascertain the best inter- dealer market and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. The firm failed to report information regarding purchase and sale transactions in municipal securities to the real-time transaction reporting system (RTRS) in the manner prescribed by rule G-14 RTRS procedures and the RTRS user's manual; the firm failed to report the correct time of trade to the RTRS in municipal securities transactions, and failed to report information the transactions within 15 minutes of time of trade to an RTRS portal. The firm failed to show the correct time of execution on the memorandum of municipal securities transactions for the account of the firm executed with another broker or dealer. The firm improperly reported information to the RTRS that it should not have; the firm improperly reported purchase and sale transactions in municipal securities to the RTRS, when the inter-dealer delivers were step outs and thus were not inter-dealer transactions reportable to the RTRS. The firm failed to enforce its written supervisory procedures, which specified that the firm would perform daily reviews of trades on the MSRB website for accuracy and timeliness and monthly reviews of the firm's MSRB reports cards.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings, therefore it is censured and fined $95,000 ($15,000 for violations of NASD rule 2320, FINRA rule 2010, and FINRA rule 2111(a), $67,500 for violations of MSRB rule G-14, $7,500 for violations of MSRB rule G-8, and $5,000 for violations of MSRB rule G-27).

47. Oct 7, 2013
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $87,500 · Begun Sep 27, 2013 · Resolved Oct 7, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2009016641301

    FINRA rules 2010, 4560, 6380a(a), 6730(a), NASD rules 2110, 3010, 3360, NYSE rule 421 - Wedbush Securities Inc., during a two-year short interest review period, submitted inaccurate short interest position reports to FINRA and also failed to report short interest positions. During a two-year short interest review period, the firm submitted inaccurate short interest position reports to FINRA which included short interest positions for certain Nasdaq, NYSE, NYSE AMEX, NYSE ARCA, and over-the-counter (OTC) equity securities. During a trade reporting review period, the firm failed, within 90 seconds after execution, to transmit to the FINRA/Nasdaq trade reporting facility (FNTRF) last sale reports of transactions in national market system (NMS) securities. This conduct constitutes separate and distinct violations of FINRA rule 6380a(a) and a pattern or practice of late reporting without exceptional circumstances in violation of FINRA rule 2010. The firm failed to report to the trade reporting and compliance engine (TRACE) transactions in TRACE-eligible agency debt securities within 15 minutes of the execution time. This conduct constitutes separate and distinct violations of FINRA rule 6730(a) and a pattern or practice of late reporting without exceptional circumstances in violation of FINRA rule 2010.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; therefore, the firm is censured, fined $87,500 and required to revise its written supervisory procedures regarding short interest position reports within 90 days of acceptance of this AWC by the nac.

48. Jun 25, 2013
    Regulatory Action: FINRA FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $750,000 · Begun Mar 30, 2012 · Resolved Jun 25, 2013 · Decision & Order of Offer of Settlement · Docket 20070077690

    OATS non-reporting,late reporting and supervision NASD rule 6955/FINRA rule 7450, NASD rule 2110 and 3010/FINRA rule 2010, NASD rule 1021 and 1031 failure to register an individual as a general securities principal.

    Without admitting or denying the allegations, the firm consented to the described sanctions and to the entry of findings; therefore, the firm is censured, fined $750,000 and required to retain within 30 days of the order accepting the offer of settlement, an independent consultant (IC) to conduct a comprehensive review of the firm's policies, systems, controls, procedures (written and otherwise), and training related to OATS reporting and the firm's supervision of OATS reporting. At the conclusion of the review which shall be no more than 120 days after the date of the order, the IC shall submit an initial report to the firm and FINRA which shall include recommendations relating to OATS reporting and the firm's supervision of OATS reporting. Within 60 days after delivery of the initial report, the firm shall adopt and implement the IC's recommendations or propose alternative procedures. Within 30 days, the IC shall evaluate the alternative procedures and provide the firm and FINRA with a written decision reflecting his/her determination. The firm will abide by the IC's ultimate determination, adopt and implement all recommendations. Within 30 days, the firm shall provide FINRA with a written implementation report, certified by a firm officer. The IC shall conduct a follow-up review and submit a written final report no later than one year from the date of the order. Within 30 days of receipt of the IC's final report, the firm shall adopt and implement the final report's recommendations.

    The firm submitted an offer of settlement without admitting or denying the alleagtions on May 2, 2013. The offer was accepted by the hearing board and the FINRA nac on June 25, 2013.

49. Jun 25, 2013
    Regulatory Action: FINRA FinalFine: $72,500 · Begun Jun 25, 2013 · Resolved Jun 25, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2009017002603

    SEC rules 10B-10, 17A-3, SEC rule 605 of regulation NMS, SEC rule 200(g) of Regulation SHO, FINRA rules 2010, 6182, NASD rules 3010, 3110 Wedbush Securities Inc. failed to provide written notification disclosing to its customers its correct capacity in transactions and the reported price. The firm made available reports on the covered orders in national market system (NMS) securities it received for execution from any person. The reports included incorrect information as to order type and size categories. The firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and/or FINRA rules addressing quality of market topics. The firm's written supervisory procedures (WSPS) failed to provide for minimum requirements for adequate WSPS in order handling (disclosure of order routing information); trade reporting (riskless principal trades reporting on firm's behalf, accurate reporting by third party); sales transactions (determining and marking sales as long or short)(prompt delivery of sales transactions by settlement); (pre- borrowing in aged fails, accepting short sale orders after an aged fail occurs, naked short selling antifraud rule, reporting short sale indicators, reporting sales as long or short); prompt delivery of sales transactions by settlement; and other rules (books and records). The firm failed to provide evidence of supervisory review for trade reporting (riskless principal trades, riskless principal trades reporting on firm's behalf) (order entry into Nasdaq) (accurate reporting by third party); and other rules (books and records). The firm failed to provide written notification disclosing to its customers its correct capacity in transactions and the correct price and the average price details. The firm failed to properly mark sell orders as short and, as a result, failed to report transactions in reportable securities to the trade reporting facility with a short sale indicator. The firm failed to show the correct order entry time and the correct long/short sale indicator in its proprietary trading ledger.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; therefore, the firm is censured, fined $72,500 and required to revise its WSPS regarding order handling (disclosure of order routing information); trade reporting (riskless principal trades reporting on firm's behalf, accurate reporting by third party); sales transactions (determining and marking sales as long or short)(prompt delivery of sales transactions by settlement); (pre-borrowing in aged fails, accepting short sale orders after an aged fail occurs, naked short selling antifraud rule, reporting short sale indicators, reporting sales as long or short); prompt delivery of sales transactions by settlement; and other rules (books and records) within 30 business days of acceptance of this AWC by the nac.

    The firm signed the proposed AWC on May 30 2013 and it was accepted by FINRA on June 25 2013.

50. Apr 2, 2013
    Regulatory Action: Nasdaq Stock Market FinalFine: $12,500 · Begun Apr 2, 2013 · Resolved Apr 2, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2009017002602

    Nasdaq rules 2110, 3010, 4755 - Wedbush Securities, inc.'s supervisory system and written supervisory procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and Nasdaq rules concerning the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints. The firm failed to correctly indicate whether orders were a buy, short sale or long sale for some orders entered into the Nasdaq market center.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; Wedbush was censured, fined $12,500 and required to revise its written supervisory procedures regarding the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints within 30 business days of acceptance of this AWC by the national review counsel.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; Wedbush was censured, fined $12,500 and required to revise its written supervisory procedures regarding the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints within 30 business days of acceptance of this AWC by the national review counsel and which was accepted on April 2 2013.

51. Mar 12, 2013
    Regulatory Action: Bats Y-Exchange, Inc. FinalFine: $12,500 · Begun Mar 8, 2013 · Resolved Mar 12, 2013 · Acceptance, Waiver & Consent(AWC) · Docket 2009017002601

    Bats rules 5.1, 11.19 - Wedbush Securities, inc.'s supervisory system and written supervisory procedures (WSPS) were not reasonably designed to achieve compliance with applicable securities laws, regulations and Bats rules concerning the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints and short sale order entry on the Bats exchange. The firm failed to correctly indicate whether two orders were a buy, short sale or long sale in some transactions.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings. Wedbush was censured, fined $12,500, and required to revise it WSP's regarding the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints and short sale order entry on the Bats exchange within 30 business days of acceptance of this AWC by the appeals committee.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings; therefore, the firm is censured, fined $12,500, and required to revise it WSPS regarding the prevention of erroneous orders and transactions and non-meritorious clearly erroneous transaction complaints and short sale order entry on the Bats exchange within 30 business days of acceptance of this AWC by the appeals committee which did accept the AWC on March 8, 2013.

52. Mar 8, 2013
    Regulatory Action: NY State Department of Financial Services FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $10,000 · Begun Nov 13, 2012 · Resolved Mar 8, 2013 · Stipulation and Consent · Docket 2012-0174-S

    On June 20, 2007 and July 31, 2009 the firm failed to include the administrative actions on CRD on the NY insurance license application.

    The firm paid a fine of $10,000 which was sent with the proposed stipulation on November 13, 2012.

    The firm sent a signed copy of the stipulation admitting the firm had not provided information regarding the administrative actions on the 2007 and 2009 applications along with the check to pay the $10,000 penalty. NY signed the stipulation and sent the firm a copy on March 8 2013.

53. Jan 2, 2013
    Regulatory Action: NYSE ARCA Inc. FinalFine: $25,000 · Begun Nov 30, 2012 · Resolved Jan 2, 2013 · Decision & Order of Offer of Settlement · Docket 20110275603

    **11/30/12** offer of settlement and consent filed by FINRA market regulation, legal section and pending. For the sole purpose of settling this disciplinary proceeding, without adjudication of any issues of law or fact, and without admitting or denying any allegations or findings referred to herein, Wedbush Securities, inc. stipulated that from on or about July 30, 2009 to on or about May 21, 2010 it: 1.violated NYSE ARCA options rule 6.67(b) by failing to comply with the order format requirements of the exchange by submitting orders with incorrect information as to whether such transaction was an opening or closing transaction. 2.violated NYSE ARCA options rule 6.14 by making adjustments to positions at the options clearing corporation that were not for the purpose of correcting a bona fide error. 3. Violated NYSE ARCA options rule 11.18 by failing to establish and maintain a system to supervise the activities of its associated persons and the operation of its business reasonably designed to ensure compliance with NYSE ARCA options rule 6.14. Stipulated sanction: 1. Censure; and 2. Fine in the amount of $25,000.

    NYSE ARCA hearing board decision issued January 2, 2013 wherein in accordance with the offer of settlement and consent, the firm is censured and fined $25,000.

    On novemebr 25, 2012 Wedbush signed an offer of settlement whcih was signed by counsel for FINRA market regulation on November 30, 2013. The hearing board accepted the offer of settlement and issued the decision on January 2, 2013 of a censure and fine of $25,000.

54. Nov 21, 2012
    Regulatory Action: FINRA FinalFine: $35,000 · Begun Nov 21, 2012 · Resolved Nov 21, 2012 · Acceptance, Waiver & Consent(AWC) · Docket 2008015084501

    Section 12(k)(2) of the sea of 1934 - Wedbush Securities failed in several instances to prohibit executions in short sales subject to the SEC emergency order by non-broker-dealer sponsored access clients of the firm.

    Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings. The firm was censured and fined $35,000

    The firm was censured and fined $35,000 11/21/2012.

55. Aug 5, 2011
    Regulatory Action: Nevada Securities Division FinalSanctions: Cease and Desist; Fine · Fine: $1,000 · Begun Nov 18, 2010 · Resolved Aug 5, 2011 · Order · Docket I10-336-JH

    Broker dealer operated a branch office in Nevada without first registering it

    Fines paid 8/5/2011

    Firm was not aware that Nevada did not permit unregistered home offices which are permitted under FINRA and NYSE rules

56. Apr 18, 2011
    Regulatory Action: Colorado Division of Insurance FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $14,300 · Begun Aug 31, 2010 · Resolved Apr 18, 2011 · Stipulation and Consent · Docket 228311

    Failing to report regulatory actions to the Colorado Division of Insurance during the period 2004-2010 in violation of 10-2- 801(1)(a) and 10-2-801(3), C.R.S.

    $14,300 fine paid via a check issued May 4, 2011.

    The firm without admitting or denying the allegations stipulated to the order issued April 18, 2011 imposing a fine of $14,300.

57. Dec 29, 2010
    Regulatory Action: State of Connecticut Insurance Department FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $1,500 · Begun Dec 6, 2010 · Resolved Dec 29, 2010 · Consent · Docket FC 10-179

    The Connecticut insurance dept. Alleged that Wedbush failed to notify the insurance dept. Of administrativre actions against the firm that had been reported on CRD.

    The firm paid a fine of $1,500.00 on dec. 28, 2010.

    Wedbush neither admitted or denied the allegations but agreed to pay the $1,500 fine on dec 28, 2010.

58. Aug 19, 2010
    Regulatory Action: FINRA FinalSanctions: Censure; Fine · Fine: $15,000 · Begun Jul 14, 2010 · Resolved Aug 19, 2010 · Acceptance, Waiver & Consent(AWC) · Docket 2009018642201

    From 1/1/2009-3/31/2009 the firm failed to report the correct time on 142 reports to "RTRS" the firm also failed to report 141 trades within the required 15 minutes.

    The firm was censured and fined $15,000 for 142 trades reported with an incorrect time and 141 trades reported after the required 15 minutes

59. Jun 29, 2010
    Regulatory Action: The Nasdaq Stock Market FinalSanctions: Censure; Fine and undeertaking · Fine: $10,000 · Begun Jun 29, 2010 · Resolved Jun 29, 2010 · Acceptance, Waiver & Consent(AWC) · Docket 2008015287001

    The firms written supervisory procedures were not reasonably designed to achieve compliance with Nasdaq rules concerning clearly erroneous transaction complaints.

    The firm was censured, fined $10,000 and required to revise the written supervisory procedures regarding NASD notice to members 04-66

    Without admitting or denying the findings the firm consented to the described sanctions and to the entry of findings

60. May 19, 2010
    Regulatory Action: FINRA FinalSanctions: Censure; Fine · Fine: $10,000 · Begun May 19, 2010 · Resolved May 19, 2010 · Acceptance, Waiver & Consent(AWC) · Docket 2009017658001

    NASD rules 2110, 2111(a), 2320 - Wedbush Securities, inc. failed to execute orders fully and promptly. In transactions for or with a customer, the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions.

    The firm was censured and fines $10,000.00. The firm made restitution payments totalling %581.38

    Without admitting or denying the findings the firm consented to the described sanctions and findings.

61. Apr 30, 2010
    Regulatory Action: The Nasdaq Stock Market FinalSanctions: Censure; Fine · Fine: $13,500 · Begun Apr 30, 2010 · Resolved Apr 30, 2010 · Acceptance, Waiver & Consent(AWC) · Docket 20080123149-01

    From July 1 to September 30 2007 the firm failed to immediately display 24 order in violation of SEC rule 604 of reg NMS. From July 1 to September 30, 2007 the firm failed to transmit 65 roe's to OATS in violation of NASD rule 6955(a).

    Censured and fined $13,500

    The firm accepted and consented, without admitting or denying the findings noted above.

62. Mar 31, 2010
    Regulatory Action: New Jersey Bureau of Securities FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s); Filing of requested documents · Fine: $20,000 · Begun Feb 24, 2009 · Resolved Mar 31, 2010 · Consent · Docket N/A

    Wedbush was alledged to fail to provide the bureau with documents in order to review the agent application of an individual who was previously a registered representative of the firm. Wedbush failed to respond to subsequent requests and a summary order was sent.

    Wedbush was fined $20,000 and provided the missing documents.

    Wedbush signed the consent order 3/25/2010 and the bureau signed it on 3/31/2010.

63. Jan 27, 2010
    Regulatory Action: NYSE ARCA, Inc. FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $3,500 · Begun Jan 27, 2010 · Resolved Jan 27, 2010 · Decision · Docket NYSE ARCA MINOR RULE

    **01/27/2010**minor rule plan fine issued. Rule violation: violation of NYSE ARCA equities rule 10.2(d) for the failure of Wedbush Morgan securities inc. to provide timely responses to NYSE regulation's letters requesting documents and information which impeded and delayed four regulatory investigations.fine imposed: $3,500.00

    The firm agreed to pay a fine of $3,500.00 after originally contesting the imposition of the fine but determining it did not make financial sense to continue with the process.

    The firm agreed to pay a fine of $3,500.00 on August 16, 2010 after originally contesting the imposition of the fine but determining it did not make financial sense to continue with the process.

64. Sep 24, 2008
    Regulatory Action: FINRA FinalSanctions: Censure; Fine · Fine: $7,500 · Resolved Sep 24, 2008 · Acceptance, Waiver & Consent(AWC) · Docket 20070104395-01

    The firm was accused of violating NASD rule 6955 in having reported to OATS 58 reports that contained inaccurate, incomplete or improperly formatted data.

    The firm agreed to pay a fine of $7,500 for violations of NASD rule 6955 reporting 58 trades to OATS incorrectly.

    The firm and FINRA settled the matter and the firm neither admitted nor denied the findings

65. Sep 24, 2008
    Regulatory Action: FINRA FinalSanctions: Censure; Fine · Fine: $22,500 · Begun Jun 27, 2006 · Resolved Sep 24, 2008 · Acceptance, Waiver & Consent(AWC) · Docket 20060052881-01

    FINRA accused the firm of violation of SEC rule 605 reporting 6 trades incorrectly, NASD rule 6955 reporting 11 trades incorrectly to OATS, SEC rule 17A-3 and NASD rule 3110 incorrect time on 4 tickets and NASD rules 2110 and 3010 for not having sufficient WSP's regarding SEC rule 605

    $5,000 for 605 violation; $5,000 for 6955 violation; $7,500 for the 17a-s and 3110 violation and $5,000 for the 2110 and 3010 violation.

    The firm and FINRA settled the matter and the firm neither admitted nor denied the findings

66. May 8, 2008
    Regulatory Action: NYSE FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s); Censure and undertaking · Fine: $200,000 · Begun Jan 31, 2006 · Resolved May 8, 2008 · Decision · Docket 06-196

    The NYSE alleged that the firm is subject to discipline pursuant to NYSE rule 476(a) for the following reasons: 1) submitted inaccurate trading information through the submission of electronic blue sheets, which led to violation of NYSE rule 401, 2) did not establish and maintain appropriate systems and procedures for the supervision and control of areas responsible for complying with electronic blue sheets reporting requirements and failed to establish a separate system to follow-up and review to ensure compliance with NYSE rules relating to the preparation and submission of electronic blue sheets, 3) made one or more material misstatements to the NYSE in response to one or more requrests for information by the NYSE, 4) did not cooperate with an NYSE investigation satisfactorily.

    $200,000 fine paid May 8, 2008 after being reduced in the appeal from the original $300,000

    A hearing on this matter was completed in NOV-2006. A verdict was issued April 2007. An appeal was filed and a decision on the appeal received March 2008 reducing the fine and scope of the undertaking. The fine was paid May 8, 2008 and undertaking is in progress.

67. Mar 31, 2007
    Regulatory Action: FINRA FinalSanctions: Censure; Fine · Fine: $24,000 · Begun Mar 31, 2007 · Acceptance, Waiver & Consent(AWC) · Docket 20060042923-01

    FINRA accused the firm of violating SEC rule 604 in failing to immediately display 52 customer limit orders, rule 5430 and 2110 for having failed to report 109 orders within 90 seconds and MSRB rule G14 for having not reported 90 municipal securities within 15 minutes

    Fined $5,000 for rule 604 violation, $14,000 for the 5430 and 2110 violations and $5,000 for the G-14 violations

    The firm and FINRA settled the cases and the firm neither admitted nor denied the findings.

68. Jan 9, 2007
    Regulatory Action: NASD (now FINRA) FinalFine: $5,000 · Begun Dec 7, 2006 · Resolved Jan 9, 2007 · Acceptance, Waiver & Consent(AWC) · Docket 2005003069501

    NASD alleged that the firm did not continuously maintain two-sided quotations in the absence of the grant of an excused withdrawal or a functional excused withdrawal by the sro during the periods of July 1 through September 30, 2005 and from April 1 through June 30, 2006. During the above-mentioned periods, the firm was registered with NASD as an intermarket trading system/computer assisted execution system ("its/caes") market maker.

    Without admitting or denying the allegations, the firm consented and agreed to pay an AWC amount of $5,000.

    Please note that Nasdaq automatically removes market maker quotes whenever there are any corporate actions (I.E. payment of dividends), and when this happens market makers are considered to be in an excused state if no new quotes are posted. During the period of July 1 through September 30, 2005, the Nasdaq system removed the firm's quotes because of dividends being paid by the ETF's the firm made markets in. Since the firm never updated its quotes in the ETF's in question, the firm was excused and withdrawn as a market maker in these securities thus eliminating the need to post two-sided quotes.

69. Jan 9, 2007
    Regulatory Action: NASD (now FINRA) FinalFine: $35,000 · Begun Jan 9, 2007 · Resolved Jan 9, 2007 · Acceptance, Waiver & Consent(AWC) · Docket 2005000251801

    In the result of the 2004 and 2005 trading and market marking surveillance examinations, NASD alleged that the firm is in violation of marketplace rules 4632 and 6130, NASD rule 3110, SEC rule 200(g), ineffective supervisory procedures, and OATS violations.

    Without admitting or denying the findings, the firm consented and agreed to pay an AWC amount of $35,000.00.

    Please note that the firm has conducted an internal investigation in regards to the matter. The firm is evaluating the adoption of new information systems for proprietary trading operations. In addition, the firm has amended its written supervisory procedures, specifically in the areas of multiple mpids, best execution, trade reporting, and other regulatory obligations.

70. Dec 20, 2006
    Regulatory Action: NASD (now FINRA) FinalFine: $32,500 · Begun Jul 25, 2006 · Resolved Dec 20, 2006 · Decision & Order of Offer of Settlement · Docket 2004100023501

    From January 1, 2005 through April 30, 2005, the firm did not accept or decline in the Nasdaq market center ("NMC"), within twenty minutes after execution transactions in eligible securities, a violation of NASD marketplace rule 6130(b). Furthermore, the firm did not transmit last sale reports of OTC equity securities within 90 seconds after execution nor designate such reports as late during the same period. In addition, the short interest report on one stock was reported incorrectly in April 2004. The firm's supervisory systems and written procedures were ineffective to achieve complete compliance with the short interest reporting requirements.

    Without admitting or denying the allegations, the firm consented and agreed to pay an AWC amount of $32,500.

    With respect to violation of NASD rule 6130(b), please note that the firm is not responsible for technical issue caused by an outside vendor on its system. Upon discovery of the issue, the firm took immediate action with the outside vendor and has since then corrected the issue.

71. Dec 14, 2006
    Regulatory Action: NASD (now FINRA) FinalFine: $150,000 · Begun Dec 14, 2006 · Resolved Dec 14, 2006 · Acceptance, Waiver & Consent(AWC) · Docket E0220040229-01

    The NASD alleged that the firm effected late trading in mutual funds after market close. Despite the time when the orders were received, the orders were executed and priced at the net asset value as of the close of trading on the same day they were received by the firm. Also, the NASD alleged that the firm's supervisory systems and written procedures were ineffective to prevent late mutual fund trading, and that the firm did not keep sufficient records that reflected the time of receipt of orders to purchase or sell mutual funds.

    Without admitting or denying the findings, the firm consented and agreed to pay an AWC amount of $150,000. And is required to review and update supervisory procedures regarding late trading and record keeping.

    The firm has strengthened its supervisory procedures and record-keeping requirements for mutual fund.

72. Mar 16, 2006
    Regulatory Action: NASD (now FINRA) FinalFine: $27,500 · Resolved Mar 16, 2006 · Acceptance, Waiver & Consent(AWC) · Docket 20042000086-02

    NASD rules 2110, 2320, 5430(a), 5430(a)- the firm failed to transmit through act last sale reports of transactions within 90 seconds after execution; and in 23 occasions for or with a customer, the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price was as favorable as possible under prevailing market conditions.

    Without admitting or denying the allegations, the firm consented and agreed to pay an AWC amount of $27,500 ($20,000 for trade reporting and $7,500 for not obtaining the most favorable price possible under prevailing market conditions)and restitution to clients of $742.22 plus interest.

    Of the 23 transactions that did not receive the most favorable price possible under prevailing market conditions, the average restitution was less than $35.00.

73. Nov 19, 2002
    Regulatory Action: NASD (now FINRA) FinalSanctions: Censure; Fine · Fine: $20,000 · Begun Nov 19, 2002 · Resolved Nov 19, 2002 · Acceptance, Waiver & Consent(AWC) · Docket NASD #CMS020212

    Wedbush Morgan, without admitting or denying the allegations, submitted a letter of acceptance, waiver, & consent,consenting to sanctions and the entry of findings on a few occasions that it was a party to a locked or crossed market condition prior to market opening and failed to fill an incoming trade-or-move message for the full size of the message or move its market within 30 seconds.

    $20,000.00 fined

    Wedbush Morgan, without admitting or denying the allegations,submitted a letter of acceptance,waiver,&consent,consenting to sanctions and the entry of findings that on a few occasions that it was a party to a locked or crossed market condition prior to market opening and failed to fill an incoming trade-or-move message for the full size of the message or move its market within 30 seconds. The firm was censured and fined $20,000.00

74. Nov 19, 2002
    Regulatory Action: NASD (now FINRA) FinalSanctions: Censure · Fine: $10,000 · Begun Nov 19, 2002 · Resolved Nov 19, 2002 · Acceptance, Waiver & Consent(AWC) · Docket NASD #CMS020236

    Wedbush Morgan,without admitting or denying the allegations,submitted a letter of acceptance,waiver,&consent,consenting to sanctions and the entry of findings that on a few occasions failed to display immediately customer limit orders in its public quotation,when such order was at a price which would have improved the firm's bid or offer,or when the order was priced equal to the firm's bid or offer and the national best bid or offer in such security.

    $10,000.00 fined

    Wedbush Morgan,without admitting or denying the allegations,submitted a letter of acceptance,waiver&consnet,consenting to sanctions and the entry of findings that on a few occasions it failed to display immediately customer limit orders in its public quotation,when such order was at a price which would have improved the firm's bid or offer,or when the order was priced equal to the firm's bid or offer and the national best bid or offer in such security.the firm was censured and fined $10,000.00.

75. Nov 19, 2002
    Regulatory Action: NASD (now FINRA) FinalSanctions: Censure; Fine · Fine: $15,000 · Begun Nov 19, 2002 · Resolved Nov 19, 2002 · Acceptance, Waiver & Consent(AWC) · Docket NASD #CMS020210

    Wedbush Morgan securities failed to honor its published quotations.

    $15,000.00 fined

    Wedbush Morgan, without admitting or denying the allegations, submitted a letter of acceptance, waiver,& consent consenting to sanctions and the entry of findings that it failed on a few occasions to honor its published quotations. The firm was censured,fined $15,000, and required to revise its written supervisory procedures relating to firm quote compliance.

76. Oct 10, 2001
    Regulatory Action: NASD (now FINRA) FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $2,500 · Begun Aug 22, 2001 · Resolved Oct 10, 2001 · Acceptance, Waiver & Consent(AWC) · Docket C01020054

    WMS was alleged to be in violation of NASD conduct rules 3110 and SEC rule 17 A-3.

    WMS paid fine in the amount of $2,500.

    On 09/27/01, without admitting or denying the allegations, Wedbush signed an acceptance and consent to findings that on a single trade date it failed to stamp 11 manual orders promptly upon receipt and agreed to pay a fine in the amount of $2,500 to NASD reg, inc.

77. Sep 28, 1999
    Regulatory Action: National Association of Securities Dealers, Inc. FinalFine: $3,000 · Begun Sep 28, 1999 · Resolved Sep 28, 1999 · Acceptance, Waiver & Consent(AWC) · Docket CMS990132

    Respondent:entered priced orders into selectnet broadcast that were priced better than the firm's public quote without reflecting each such order in the firm's public quote;and failed to establish,maintain, and enforce adequate written supervisory procedures designed to achieve compliance with the applicable securities laws and regulations concerning the SEC's order handling rules and NASD marketplace rule 4613.(SEC rule 11AC1-1(c)(5)and NASD conduct rules 2110 and 3010).

    Fine of $3,000.00***04/11/2000 GS: $3,000.00 paid on 12/07/1999 - invoice NO.99-MS858.

    None

78. Mar 30, 1989
    Regulatory Action: New York Stock Exchange FinalFine: $1,000 · Begun Mar 30, 1989 · Resolved Mar 30, 1989 · Decision

    Due to age of this filing no other informations were provided.

    Fine of $1000.00 on 03/30/1989

    07/02/1990 SEC litigation, actions and proceedings bulletin for the quarter ending 06/30/1989 (volume 55,bulletin 02,page 256)discloses: the New York Stock Exchange fined Wedbush Morgan securities inc. $1,000.00 on March 30,1989 based on a violation of exchange rule 132.30 and failure to submit audit trail data in order to qualified clearing agency regarding stock transactions for the weeks of 9/12 and 10/17/88.

79. Jul 1, 1988
    Regulatory Action: State of Oregon FinalSanctions: Cease and Desist · Fine: $1,000 · Begun Jul 1, 1988 · Resolved Jul 1, 1988 · Order · Docket E8-37

    State of Oregon alleged that three agents of WMS were not properly registered to conduct business in Oregon.

    Disposition resulted in a fine of $1000.00 of which was paid in July 1988.

    State of Oregon alleged that three agents of WMS were not properly registered to conduct business in state. WMS resolved the matter by consenting to the entry of a cease and desist order and a fine of $1,000.00

80. Mar 31, 1988
    Regulatory Action: National Associattion of Securities Dealers, Inc. FinalFine: $50,000 · Begun Feb 22, 1984 · Resolved Mar 31, 1988 · Decision · Docket SEA-334

    Failure to supervise

    $50,000 paid on 4/24/89 -deposit NO.009

    5/29/85:complaint #SEA-334 filed 2/22/84 by district NO.1 alleging violations of article III,sections 1,2,15 article IV,section 5 of the rules of fair practice and MSRB rules G-17 and G-19 in that respondent member failed to comply with NASD's formal written requests for information made pursuant to article IV, section 5 of the rules of fair practice***decision rendered 4/4/85,wherein respondent member is censured,fined $50,000 and is directed to provide to the committee what supervisory procedures have been implemented to prevent a recurrence of the violations within 90 days from the date of the decision; allegations of violations of MSRB rules G-17 and G-19 as contained in the sixth cause of complaint were dismissed***4/18/85, appealed to board.***decision rendered 3/20/86,wherein sanctions as to the member, jones and parker are affirmed. Allegations of failure to supervise with regard to cause two and three are dismissed with regard to the respondents member and templeton in that the board determined that he purposely failed to inform the firm of his discretionay authority and that it was the branch manager's failure to supervise jones that prevented the firm from fulfilling its supervisory responsibility. 5/7/86 -applealed to the SEC. 4/12/88- SEC news digest issue 88-61 dated 3/31/88- the SEC affirmed sanctions imposed by the NASD on Wedbush. The SEC found, as had the NASD,that,in 1980-1982, the firm failed to exercise proper supervision over two salesmen in its bellevue, Washington branch office and that the firm improperly delayed furnishing the NASD with requested information during the NASD's investigationof the salesmen's activities.(REL.34-25504)***$50,000 paid on 4/24/89- deposit NO.009

81. Nov 30, 1987
    Regulatory Action: State of Idaho FinalSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $4,000 · Begun Nov 30, 1987 · Resolved Nov 30, 1987 · Order · Docket 1987-7-56

    WMS offered and sold securities in state without broker/dealer and agent registration; offered and sold securities in state which securities were not registered or exempt; failed to exercise sufficient compliance and supervision over its agents and activities in state.

    WMS submitted broker/dealer and agent registration applications and paid fine of $4,000.00 within ten days of order.

82. Nov 1, 1987
    Regulatory Action: State of Georgia FinalSanctions: Cease and Desist · Fine: $1,250 · Begun Nov 1, 1987 · Resolved Nov 1, 1987 · Order · Docket 50-87-9561

    State of Georgia alleged that WMS and agent effect two sales transactions while the agent was not registered with the state.

    Matter was resolved by WMS and the agent agreeing to an order to prohibition and settlement and reimbursement to the state of their $1,250.00 costs.

83. Mar 9, 1979
    Regulatory Action: State of Colorado FinalSanctions: Cease and Desist · Fine: $2,000 · Begun Feb 6, 1978 · Resolved Mar 9, 1979 · Stipulation and Consent · Docket 7B9NRU204

    WMS's predecessor, Wedbush, noble, cook inc., was subject of a cease and desist order. Wedbush had failed to include in its registration renewal packet a copy of its latest audited financial statement and a check in the amount of $70.00. WMS's application for renewal had also included application for two employees who were domiciled in Colorado but inadvertently had failed to have their signatures notarized.

    As a result of these inadvertent failures to include all the necessary documents, the State of Colorado issued a cease and desist order until such documents were submitted and properly notarized. WMS provided documents and paid a fine of $2,000.00 on 3/14/1978.

84. Jan 23, 1978
    Regulatory Action: State of Washington FinalSanctions: Cease and Desist · Begun Jan 23, 1978 · Resolved Jan 23, 1978 · Order · Docket SD-133-77

    State of Washington alleges Wedbush from offering unregistered securities in violation of RCW 21.20.140 by its policy of paying interest on its customers' free credit balances.

    WMS and its agents will not engage in the general solicitation of customers by advertisement of its interest payment policy nor use said interest payment policy as an inducement to a prospective customer. Wedbush will include with current periodic statements reasonable perfunctory notice describing its interest payment policy.

    In 1976 Wedbush advertised in the State of Washington that it paid interest on customer's balances intended for re-investment. The State of Washington deemed this advertising as an offering of unregistered securities. On January 23, 1978, the state and firm entered into a stipulation that the firm will not engaged in the general solicitation of customers by advertising of its interest payment policy and will include with current customer periodic statements reasonable perfunctory notice describing its interest payment policy.

Actions about affiliates (5)

1. Jan 8, 2019
   Regulatory Action: NYSE ARCA, Inc. FinalAbout an affiliate: Wedbush, Edward William; the full record is on the affiliate's own Form ADVSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $1.0M · Begun Oct 16, 2017 · Resolved Jan 8, 2019 · Decision & Order of Offer of Settlement · Docket 2016-07-01264

   Failure to oversee and supervise the trading activities of its president

   The firm was censured, fined $1,000,000 (($900,000 of which is payable jointly and severally) and required to complete the undertakings as stated in the offer of settlement, including to hire an outside auditing firm, not unacceptable to NYSE regulation staff, to assist its internal audit department in conducting internal audits. Wedbush Securities shall (I) complete a comprehensive review of the firm's compliance program; (II) implement changes and enhancements; and (III) work together with an independent consultant concerning the areas to be reviewed. Wedbush Securities shall also hire an additional permanent, full-time, senior employee with relevant regulatory experience to work in these areas.

   Without admitting or denying the allegations, Wedbush Securities Inc. ("Wedbush" or the "firm") consented to the sanctions and to the entry of findings

2. Jan 8, 2019
   Regulatory Action: NYSE ARCA, Inc. FinalAbout an affiliate: Wedbush, Edward William; the full record is on the affiliate's own Form ADVSanctions: Civil and Administrative Penalt(ies) /Fine(s); Censure and undertaking · Fine: $1.0M · Begun Oct 16, 2017 · Resolved Jan 8, 2019 · Decision & Order of Offer of Settlement · Docket 2016-07-01264

   Wedbush Securities Inc. (the firm, wedb, or respondent) was named a respondent in a FINRA complaint alleging that it knew and systemically failed to oversee and supervise the trading activities of its principal, edward w. Wedbush ("MR. Wedbush"). The complaint alleges that in addition to serving as the president of wedb and the chairman of wedb's parent company, Wedbush, inc., MR. Wedbush spent several hours each trading day actively managing and trading in more than 70 accounts (collectively, the "ew controlled accounts"). Despite MR. Wedbush's active trading in dozens of customer, personal, and proprietary accounts, respondents failed to implement any process to monitor or supervise MR. Wedbush's order entry, trade executions, or trade allocations in the ew controlled accounts, including for potential conflicts of interest and potential manipulative activity. The absence of monitoring or supervision of his trading activities allowed MR. Wedbush to handle the ew controlled accounts in an unfettered manner that was not permitted for other traders at the firm. For example, MR. Wedbush regularly instructed a firm employee to enter orders under a general account, waiting until the end of the trading day to allocate executed trades among the various ew controlled accounts (I.E., to customers, personal accounts, or proprietary accounts). MR. Wedbush's post-execution allocations were determined based entirely on his own discretion, and the firm had no process to ensure that trade allocations among the ew controlled accounts were not being made to steer profitable trades to preferred ew controlled accounts or for other improper purposes. MR. Wedbush's orders for the ew controlled accounts were made and executed on a separate trading platform, not used by other wedb traders. And no other Wedbush employees, besides MR. Wedbush, were allowed to make post-execution allocations. The complaint also alleges that in managing the ew controlled accounts, MR. Wedbush: (I) handled various customer accounts together with proprietary and personal accounts, in the same securities at the same time; (II) "bunched" orders for the ew controlled accounts; (III) failed to record account names or designations prior to trade execution and thereby wedb willfully violated section 17(a) of the Securities Exchange Act of 1934, and rules 17A-3 and 17A-4 thereunder; and (IV) waited until after trade execution to allocate trades among the ew controlled accounts. The complaint further alleges that wedb and MR. Wedbush failed to mark proprietary orders with the appropriate designator. The firm, however, took no meaningful action to address a co-CCO's compliance concerns about the lack of supervision of MR. Wedbush's trading with the audit committee of wedb's board of directors. Wedb's supervisory systems and procedures were inadequate and were not reasonably designed for its business as it related to the ew controlled accounts. The firm failed to establish, implement, and enforce adequate supervisory systems and procedures, including WSPS, reasonably designed to supervise MR. Wedbush and the ew controlled accounts to achieve compliance with the federal securities laws and exchange rules, respondents violated NYSE ARCA rules.

   The firm was censured, fined $1,000,000 (($900,000 of which is payable jointly and severally) and required to complete the undertakings as stated in the offer of settlement, including to hire an outside auditing firm, not unacceptable to NYSE regulation staff, to assist its internal audit department in conducting internal audits. Wedbush Securities shall (I) complete a comprehensive review of the firm's compliance program; (II) implement changes and enhancements; and (III) work together with an independent consultant concerning the areas to be reviewed. Wedbush Securities shall also hire an additional permanent, full-time, senior employee with relevant regulatory experience to work in these areas.

   Without admitting or denying the allegations, Wedbush Securities Inc. ("Wedbush" or the "firm") consented to the sanctions the firm was censured, fined $1,000,000 (($900,000 of which is payable jointly and severally) and required to complete the undertakings as stated in the offer of settlement, including to hire an outside auditing firm, not unacceptable to NYSE regulation staff, to assist its internal audit department in conducting internal audits. Wedbush Securities shall (I) complete a comprehensive review of the firm's compliance program; (II) implement changes and enhancements; and (III) work together with an independent consultant concerning the areas to be reviewed. Wedbush Securities shall also hire an additional permanent, full-time, senior employee with relevant regulatory experience to work in these areas.

3. Jan 12, 2018
   Civil Judicial Action FinalAbout an affiliate: Wedbush, Edward William; the full record is on the affiliate's own Form ADVSanctions: Disgorgement; Fines · Fine: $209,091 · Begun Mar 30, 2017 · Resolved Jan 12, 2018 · Settled

   Violation of fiduciary duties under ERISA and engaging in prohibited transactions

   The firm agreed to pay a penalty of $209,090.91 to the Department of Labor. The firm agreed to pay restitution to the plans a total sum of $2,090,909.09. The firm also agreed to offer certain individuals in the plan the right to sell their shares in Wedbush inc at a price of $14.

4. Sep 22, 2017
   Regulatory Action: Nevada Securities Division FinalAbout an affiliate: Lime Brokerage LLCSanctions: Cease and Desist; Respondent shall obtain a branch office license for all places in the state of Nevada from which one or more sales · Fine: $5,000 · Begun Sep 19, 2017 · Resolved Sep 22, 2017 · Order · Docket I17-061

   An inspection of respondent's records was initiated because in July 2016, one of respondent's sales representatives moved from California to Nevada and appeared to transact securities-related business from his residence prior to obtaining a license for this branch office. It was determined that respondent maintained an unlicensed branch office in violation of NRS 90.360(2) and nac 90.392

   Civil penalty and inspection fee paid on 09/19/2017.

   At all times, the firm properly registered the branch office by filing form BR with the state of Nevada. The firm, however, did not timely file with the state of Nevada as a foreign corporation pursuant to NRS 80.010 which effectively rendered the branch office as deficient.

5. Sep 10, 2012
   Regulatory Action: FINRA FinalAbout an affiliate: Lanni, Richard Anthony; the full record is on the affiliate's own Form ADVSanctions: Civil and Administrative Penalt(ies) /Fine(s) · Fine: $375,000 · Begun Feb 2, 2011 · Resolved Sep 10, 2012 · Decision & Order of Offer of Settlement · Docket 2008012738002

   The firm failed to establish and maintain a supervisory sytem reasonably designed to achieve compliance with applicable laws rules and regulations concerning variable annuities and general sales practice even though this was never noted as an issue in any annual examination conducted by the NYSE, NASD or FINRA and the firm did have WSP'S. The firm failed to maintain records it did not know existed on a reps personal email account or were mailed by a rep in violation of the firms policies. FINRA alleges a failure to adequately supervise two reps. These allegations include violations of section 17 of the Securities Exchange Act of 1934, SEC rules 17A-3, 17A-4, FINRA rule 2010, NASD rules 2110, 3010, 3010(a), 3010(b), 3010(c), 3010(d), 3010(e), 3110

   The firm was censured and fined $360,000 plus joint and several liability for $15,000.

   The firm settled the case without admitting or denying the allegations on September 10, 2012 for a fine of $360,000 plus $15,000 joint and several with two employees.

Form ADV Item 11 and its Disclosure Reporting Pages, via the SEC record. All adviser disciplinary records.