FINRA's $1 million fine levied against Wedbush Securities (Los Angeles, CA) for incomplete and inaccurate blue sheet submissions and related audit/supervisory system failures became final after the Southern California-based firm dropped its appeal of the extended hearing panel's decision and conclusion that the firm acted "willfully" and "egregiously" in its "reckless disregard" of industry rules and requirements.
FINRA originally accused LA's Wedbush Securities of submitting 816 blue sheet responses over 20 months to the SEC and FINRA that were not complete and accurate, accounting for approximately 16% of Wedbush's total blue sheet response submissions during that period.
When Wedbush corrected the deficient blue sheet responses—some over a year after the original incomplete and inaccurate submissions took place, according to FINRA—it became apparent that Wedbush had failed to report over 5.6 million transactions in its original blue sheet submissions.
Enforcement called the firm "ignorant of the defects" because it had no audit system in place to detect the problems, while simultaneously surmising that Wedbush's "violations of the federal securities laws and regulations were willful."
The Office of Hearing Officers further explained the severity of Wedbush's misconduct: "If the Firm had simply spot-checked its submissions, it would have discovered many of the problems discussed here."
That led the OHO to conclude that "the violations were egregious and that the Firm acted willfully," going on to write that Wedbush's actions indicates "the Firm's lack of concern for, understanding of, and meaningful attention to its blue sheet responsibilities."
OHO also found that Wedbush acted in "reckless disregard of regulatory requirements" in submitting incomplete and unchecked blue sheets without regard to the risk of inaccuracies and despite the importance of blue sheets to regulators.
This is not Wedbush's first OHO-related discipline, nor its first dropped or defeated appeal, for failing to accurately and/or timely report items to FINRA or the SEC: In 2014, Wedbush and president Edward Wedbush lost an appeal of a 2012 complaint alleging failure to accurately and timely report customer complaints, employee registrations, and supervisory failures. In that decision, FINRA fined Wedbush $300,000 and President Wedbush an additional $50,000.
FINRA also accused Wedbush Securities of systematic market-access violations and anti-money laundering deficiencies in August 2014.
The blue sheet related fine is broken down into a penalty of $850,000 for the incomplete and inaccurate blue sheet submissions, and an additional $150,000 fine for Wedbush's failure to have in place an audit system providing for record-keeping accountability and a similar failure to establish, maintain and enforce a supervisory system and written supervisory procedures (WSPs) reasonably designed to achieve compliance with securities laws and NASD rules.
If you have invested with Los Angeles-based Wedbush Securities or with another firm whose failure to timely, fully and/or accurately submit blue sheet or similar reporting, disclosure or compliance documents to FINRA or the SEC or whose absent or willfully deficient supervisory systems and procedures have proven harmful to your investments through a failure to report transactions or identify potential misconduct such as manipulation or even account intrusions and unauthorized trading, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.