FINRA fined Los Angeles-headquartered brokerage Wedbush Securities Inc $1.5 million for supervisory failures and for violating the SEC's customer protection and net capital rules. FINRA wrote that Wedbush's repeatedly underfunded its customer reserve account, was net capital deficient in 2015 and 2016, and held customer assets in unprotected locations, adding that the firm failed to satisfy its supervisory requirements, thus exposing customer funds and securities to risk.
Regarding the net capital deficiency over a five-month period in 2015 and 2016, investigators found that Wedbush failed to take required deductions when valuing CDs, resulting in net capital deficiencies of $10.5 to $59.4 million.
Wedbush also purportedly failed to calculate its customer reserve requirement 84 times between 2011 and 2016, which caused Wedbush to underfund its customer reserve account 73 times, by $2 million to $77 million. FINRA found that by including ineligible assets in its customer reserve account, Wedbush underfunded its reserve an additional 110 times, by $9 million to $375 million.
In charging Wedbush with repeatedly violating the possession or control provision of the SEC's Customer Protection Rule from 2009 to 2016, Enforcement wrote that Wedbush created or increased deficits in the quantity of securities it kept, and held customer assets such as fully paid and excess margin securities in locations that were not protected from third-party claims.
For instance, FINRA found that Wedbush failed to timely move securities from clearance and settlement accounts to the firm's custody account, which placed customer assets at risk, in violation of SEC rules.
Finally, investigators concluded that Wedbush failed to establish and maintain adequate supervisory systems and procedures, which further exposed customers to risk and caused the firm to file inaccurate reports, all while preventing detection of the various deficiencies for almost seven years.
If you have invested with Wedbush Securities or with any broker, financial adviser, or firm who has exposed your securities or funds to unnecessary risk due to violation of industry regulations, and this inadequate supervision 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.