FINRA on Friday penalized Wedbush Securities of Los Angelese $150,000 for various compliance and supervision shortcomings related to clients’ margin securities, as well as failing to disclose mark-ups and mark-downs of certain bond transactions.
Wedbush Securities has 500 registered reps in 70 branch offices. The firm has had a history of failing to supervise certain trades that resulted in scrutiny from regulators and penalties, along with other compliance problems.
FINRA in 2022 fined Wedbush Securities $900,000 for trading violations called "failed-to-deliver positions," which occur when a seller fails to deliver securities to the buyer when delivery is due.
A year later, Wedbush was penalized $10 million by the Securities and Exchange Commission (SEC) as part of a broader, $289 million multi-firm settlement and penalties for firms failing to catch executives and traders using unofficial communications like WhatsApp.
A Wedbush Securities spokesperson on Monday declined to comment about the FINRA penalty and settlement. In the FINRA order, Wedbush agreed to the regulators findings in the matter without admission or denial. The firm was also censured by FINRA.
In Friday’s settlement, FINRA claimed that, from June 2018 and December 2022, Wedbush violated SEC rules for failing to maintain possession or control of customers' fully paid and excess margin securities. And during this same period, Wedbush violated FINRA rules requiring an appropriate supervisory and compliance system designed to monitor those securities.
In another matter, from August 2022 and August 2023, the firm was in violation of industry rules when it did not disclose required mark-up and mark-down information on retail customer confirmations.
Bond mark ups affect the pricing of municipal and government bonds, and therefore have an impact on what customers in the end pay for those securities.
According to FINRA, Wedbush issued approximately 300 confirmations for municipal securities transactions to retail customers that did not include mark-ups and mark-downs expressed as a total dollar amount and as a percentage of the prevailing market price during the time of the violations.
And also during this period, Wedbush issued approximately 1,050 confirmations for corporate and agency debt transactions to retail customers that did not include mark-ups and mark-downs expressed as a total dollar amount and as a percentage of the prevailing market price, according to FINRA.
“These failures resulted from Wedbush personnel failing to timely enter [prevailing market price] into the firm's order management system,” according to FINRA.
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