FINRA Fines Los Angeles-Based Wedbush Securities for Inadequate Oversight Systems

INVESTORS: Los Angeles-based brokerage firm Wedbush Securities, Inc. was fined $975,000 by FINRA for failing to ensure it had appropriate systems and controls in place to detect market abuse.

FINRA fined Los Angeles-based brokerage firm Wedbush Securities, Inc., $975,000 for failing to ensure they had appropriate systems and controls in place to detect market abuse.

FINRA alleged that Wedbush provided customers access to third-party electronic trading platforms without monitoring the customers’ trading activity, increasing the risk that suspicious trading activity would go undetected. FINRA also alleged that Wedbush had failed to supervise the trading activities of its proprietary traders since June 2015. FINRA specifically referenced one incident where an institutional customer of Wedbush showed significant suspicious trading activity, including 2,900 layering exceptions involving over 130 stock symbols associated with the customer’s order flow. The customer’s account was not closed until March of 2022, despite the suspicious activity occurring in 2017.

In a statement, FINRA reported:

Wedbush mistakenly believed that it was not required to review this trading for any type of potentially manipulative activity since it was no longer providing market access. Instead, the firm believed that the obligation to review this trading for potentially manipulative activities rested solely with the executing broker-dealers. Thus, since June 2015, the firm did not conduct any supervisory reviews of the trading activities by its electronic trading customers for potentially manipulative trading, such as layering, spoofing, wash sales, or marking the close or open.

The Sonn Law Group is currently investigating allegations surrounding Wedbush Securities, Inc.. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.