Wedbush Securities to Pay $1.2 Million Over Unregistered Microcap Sales

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California-headquartered brokerage firm Wedbush Securities agreed to pay $1.2 million to settle the SEC's charges that the firm unlawfully sold 100 million unregistered shares of 50 different low-priced microcap companies. The SEC order also indicates that Wedbush failed to report suspicious activity through required report filings.

According to SEC order 3-20679, Wedbush engaged in the unregistered offers and sales and failed to file suspicious activity reports despite the presence of several red flags as to suspicious and/or illicit activity regarding the unregistered microcap transactions. Because the firm failed to conduct an appropriate inquiry into the suspicious transactions, wrote investigators, it similarly failed to detect potential penny stock fraud that would have allowed for the filing of the suspicious activity reports.

The report names Silverton SA aka Wintercap as an account holder through which suspicious activity occurred by means of depositing low-priced securities only to turn around and sell many of those shares after which proceeds were withdrawn. The SEC wrote that the pattern continued and that until at least 2018, Silverton enabled scheming individuals and groups to fraudulently sell stocks to investors, going so far as to disguise control persons who intended to defraud investors.

In a separate action, the SEC brought charges against Silverton alleging engagement in a large international microcap fraud scheme.

Meanwhile, the SEC wrote that Wedbush should have, but failed to, adequately respond to the suspicious activity indicative of microcap fraud, which earned Wedbush a net profit of $173,508.40 on commissions alone. Wedbush purportedly failed to follow its own written supervisory procedures and failed to conduct reasonable reviews and inquiries to detect suspicious transactions, such as the Silverton scheme.

If you invested with a Wedbush Securities broker in California or with any broker-dealer or investment adviser in penny stocks or offerings related to Silverton SA aka Wintercap and your brokerage firm's failure to conduct a reasonable inquiry or unearth red flags pointing to a significant fraudulent microcap scheme has proven harmful to your financial interests through increased commission payments or outright losses,please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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