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June 06, 2014 at 06:23 AM
The Securities and Exchange Commission announced charges on Friday against Los Angeles-based Wedbush Securities Inc., and two officials accused of violating the agency’s market access rule that requires firms to have adequate risk controls in place before providing customers with access to the market.
The SEC’s Enforcement Division alleges that Wedbush, which the agency said has consistently ranked as one of the five largest firms by trading volume on NASDAQ, failed to maintain direct and exclusive control over settings in trading platforms used by its customers to send orders to the markets.
“Wedbush provided market access to overseas traders without preapproval and without ensuring that they complied with U.S. law,” said Andrew Ceresney, director of the SEC Enforcement Division, in a statement. “We will hold Wedbush accountable for reaping substantial profits while failing to protect U.S. markets from the risks posed by these traders.”
Wedbush did not have the required pre-trade controls, failed to restrict trading access to people whom the firm preapproved and authorized, and did not conduct an adequate annual review of its market access risk management controls, the SEC said.
The Enforcement Division alleges that the firm’s violations of the market access rule were caused by Jeffrey Bell, the former executive vice president in charge of Wedbush’s market access business, and Christina Fillhart, a senior vice president in the market access division.
Wedbush Securities issued a statement the same day stating that it “respectfully disagrees with the assertion in the SEC’s administrative complaint that the firm’s controls and procedures in this area were inadequate.”
The firm said in the statemnet that it “believes that its risk management controls and procedures in this area were reasonably designed to achieve compliance with applicable regulatory requirements, and that they were consistent with the rules and guidance given by the SEC and its staff beginning in 2011.” As this SEC case demonstrates, Wedbush went on to say, “the SEC’s market access rule continues to evolve. In fact, SEC guidance titled ‘Responses to Frequently Asked Questions Concerning Risk Management Controls for Brokers or Dealers with Market Access‘ was not issued until April 15, 2014. The firm continues to monitor changes to the rule and actively modifies procedures as appropriate.”
