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Regulation and Compliance > Federal Regulation > FINRA

SEC Fines Wedbush $2.4M in Market Access Case; FINRA Complaint on Deck

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The Securities and Exchange Commission announced Thursday that Los Angeles-based broker-dealer Wedbush Securities and two of its top officials have agreed to settle a pending SEC case for market access violations.

Wedbush Securities settled by admitting wrongdoing, paying a $2.44 million penalty and retaining an independent consultant.

Wedbush’s former executive vice president Jeffrey Bell and senior vice president Christina Fillhart also agreed, without admitting or denying the SEC’s findings, to settle the charges against them for causing Wedbush’s violations of the market access rule. 

Bell and Fillhart agreed to pay a combined total of more than $85,000 in disgorgement, prejudgment interest and penalties.

The SEC’s order finds that Wedbush violated the market access rule by failing to have adequate risk controls in place before providing customers with access to the market, including some customer firms with thousands of essentially anonymous overseas traders. 

The order also finds that Wedbush committed other violations in connection with its market access business.

“Wedbush acknowledges that it granted access to thousands of overseas traders without having appropriate safeguards in place,” Andrew Ceresney, director of the SEC Enforcement Division, said in a statement. “Broker-dealers who enjoy the benefits of being registered must honor the responsibilities that come with that status, and we will continue to hold responsible those who provide market access without implementing proper risk controls.”

The Financial Industry Regulatory Authority announced in August that it had filed a complaint against Wedbush Securities for systemic supervisory and anti-money laundering violations in connection with providing direct market access and sponsored access to broker-dealers and nonregistered market participants.

During the period at issue, FINRA says that Wedbush was one of the securities industry’s largest market access providers, which included overseas high-frequency, high-volume, algorithmic day-trading firms, and made millions of dollars from its market access business.

The FINRA complaint alleges that from January 2008 through August 2013, Wedbush failed to dedicate sufficient resources to ensure appropriate risk management controls and supervisory systems and procedures. “This enabled its market access customers to flood U.S. exchanges with thousands of potentially manipulative wash trades and other potentially manipulative trades, including manipulative layering and spoofing,” FINRA stated.

FINRA notes that the issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint.

Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel.

— Check out FINRA Charges Wedbush With Market Access Violations on ThinkAdvisor.


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