The SEC censured and ordered Wedbush Securities to pay a $250,000 penalty for failing to supervise broker Timary Delorme in Wedbush's Los Angeles office. In the twilight of her 40-year career with Wedbush (36 as a broker), Delorme became associated with a securities fraud through manipulative trades in penny stocks over multiple years related to a pump-and-dump scheme.
Although the allegations against Delorme (CRD #736418) began with a pair of 2012 customer disputes, matters that evolved into FINRA arbitration Delorme settled for $315,000, and which alleged fraud, deceit, misrepresentation, omission of material fact, negligence, unsuitability, unauthorized trading, extortion, and breach of fiduciary duty. Wedbush failed to terminate its stock broker for several years, until the SEC barred Delorme in 2018 from acting as a broker or investment adviser in the wake of a federal conviction on charges of securities fraud, conspiracy to commit securities fraud, and wire fraud.
Stockbroker Delorme's FINRA file also indicates that in May 2018, the Oregon Division of Financial Regulation similarly revoked Delorme's registration for the manipulative securities-trading scheme. Wedbush first hired Delorme in 1976, she became a registered representative in 1981, and joined the California investment adviser ranks in 2010.
The findings state that Wedbush's supervisory policies failed to adequately address securities violations committed by Delorme that Wedbush supervisors discovered. Specifically, Wedbush supervisors discovered a red flag e-mail that outlined Delorme's role in fraudulent penny stock transactions, and also knew about the two FINRA arbitrations filed by Delorme's customers—and identifying the very same penny stock issuers.
The SEC report found that even a FINRA inquiry into Delorme's penny stock misconduct wasn't enough to push Wedbush to adequately respond, leading investigators to conclude that Wedbush failed to develop and implement reasonable policies and supervisory procedures.
Investigators wrote that there was "substantial confusion" at Wedbush as to whose responsibility it was to investigate red flags of potential market manipulation by brokers, resulting in Wedbush's failure to supervise Delorme.
Regulators also found that at least one supervisor felt he had to "be gentle" with Delorme of Costa Mesa, since she had been at the firm for 30 years and because her business partner was a partial owner of Wedbush Securities, even though evidence as portrayed above pointed to Delorme's involvement with the De Maison/Wilshinsky penny stock pump-and-dump fraud.
The present order follows the SEC's 2018 institution of administrative proceedings against Wedbush Securities for failing to supervise Delorme, who herself had been issued a cease-and-desist order for her role in a penny stock manipulation scheme.
If you have invested with barred broker Timary Delorme or with any financial adviser or registered representative who has unsuitably solicited or recommended penny stocks, or microcap stocks, or stocks that were manipulated in a fraudulent pump-and-dump scheme, please call our experienced FINRA arbitration attorneys at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.