In a 48 page decision dated August 2, 2012, the FINRA Office of Hearing Officers ordered the suspension of Edward Wedbush for 31 days from all supervisory activities, other than the supervision of trading and order entry, for failure to supervise the Firm's registration filings. He was also fined $25,000. The firm bearing his name, Wedbush Securities, Inc. was fined $300,000. The decision may be found on FINRA'S website by clicking here.
This lengthy, but appealable, decision, culminated 10 years of regulatory examinations, warnings, and investigations into both Wedbush Securities and Edward Wedbush's supervisory failures. Along with finding that both the firm and Wedbush failed repeatedly to timely report critical events, FINRA found that even when regulators alerted Wedbush to the problems, he failed to take decisive action to remedy the failures.
“Over a period of at least eight years leading up to the filing of the complaint [filed in October 2010], NYSE and FINRA both warned the firm in examinations, an AWC, Wells Notices, and disciplinary actions, or failures in its regulatory reporting, yet problems persisted,” the FINRA hearing officer reported.
Due to the repeated failures, the decision states: “[t]he firm’s failure to remedy the reporting problems despite repeated warnings from FINRA and the NYSE is also an aggravating factor applicable to all violations.”
Singling out Edward Wedbush himself, the hearing officer wrote: “Mr. Wedbush knew of the firm’s reporting issues” and “as president of the firm, Mr. Wedbush should have taken more steps to ensure that the firm addressed its problems, but he did not…"
A FINRA member firm and its supervisors are required to file updates for each broker's Form U-4 and/or Form U-5 when there are complaints, arbitration claims, or other events of regulatory significance. These Forms are the professional record of each broker and some of this information is publicly reported. Wedbush and his firm failed to make timely updates and disclosures to 84 the Form U-4 or Form U-5 of its Associated Persons. In many instances these failures hid terminations due to misconduct, arbitration claims, and customer complaints.
In addition, a FINRA member firm is required to file a Form RE-3 disclosing when an employee is a defendant or respondent in any securities or commodities-related civil suit or arbitration which resulted in a judgment, award or settlement for more than $15,000. Wedbush and his firm filed 33 form RE-3s late, file 3 more forms with inaccurate information, and completely failed to file one RE-3 altogether.
The hearing officer found Wedbush himself failed to file and disclose accurate information about the settlement of a federal civil case in which he paid a settlement in excess of $234,000 in exchange for dismissal of the case. Rather than disclose the truth, Wedbush's disclosure stated: "The matter was resolved is [sic] a court trial judge including the 9th Circuit appeal court and Mr. W was found not guilty."
If the decision becomes FINRA's final disciplinary action, Edward Wedbush's suspension will be in effect from October 1 to 31, 2012.
Our firm has successfully pursued several cases against Wedbush Securities, Inc., its predecessors, and its brokers. We have several more cases pending against the firm, its namesake, and some of the brokers mentioned in the decision. If you invested with Wedbush Securities, Inc. and believe its lack of adequate supervisory systems has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.