FINRA Fines Wedbush More Than $550K in Separate Incidents
Independent broker-dealer Wedbush Securities Inc. has been fined by the Financial Industry Regulatory Authority in two separate incidents for a total of more than $550,000. One incident involved the publication of inaccurate quarterly and monthly reports, while the second incident represented supervisory failures related to variable rate structured products, or VSRPs.
In the first incident, FINRA reported that from September 2009 to March 2022, the firm published inaccurate and incomplete quarterly and monthly reports related to order routing and execution. According to FINRA, Wedbush’s quarterly reports excluded a significant number of orders, contained inaccurate order percentages, and lacked required information about execution venues. Additionally, the firm failed to notify customers about the availability of information concerning National Market System securities.
Furthermore, FINRA stated that Wedbush’s monthly reports contained inaccurate order data or were not published on time. The firm also failed to establish a supervisory system to ensure compliance with these reporting obligations, which FINRA said are crucial for market transparency and help customers understand how their orders are handled. FINRA emphasized that these failures hindered transparency and could have impacted investors’ ability to make informed decisions.
Without admitting or denying the allegations, Wedbush agreed to a censure and a $425,000 fine.
In a separate incident, FINRA said that between January 2015 and December 2019, Wedbush representatives recommended VRSPs to 20 customers without adequately assessing their suitability. VRSPs are a category of complex structured products that initially pay interest at a fixed, above-market “teaser” rate for a short period of time, typically one year, before switching to a floating interest rate that is based on a reference index or asset. VRSPs typically have long maturities, generally between 10 and 30 years.
Twelve customers with low or moderate risk tolerances were unsuitably advised to purchase these products, resulting in realized losses in excess of $34,000. Additionally, eight other customers were recommended to invest at levels that resulted in excessive concentration, exposing them to heightened risk.
Without admitting or denying the allegations, Wedbush agreed to a censure, a $50,000 fine, and restitution of $77,736.33 plus interest.
Founded in 1955 and headquartered in Los Angeles, Wedbush provides securities brokerage, wealth management, investment banking, and clearing services. The firm employs approximately 520 registered representatives and has approximately 70 branch offices.
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