On November 3, 2022, FINRA censured Wedbush Securities Inc., fined the firm $850,000, and required it to certify that the firm’s WSPs and supervisory system are reasonably designed to review the accuracy of account statements sent to customers and to achieve compliance with its obligation to deliver to customers annual privacy notices, margin disclosures, and order execution disclosures.
From January 2013 through December 2018, Wedbush negligently misrepresented on monthly account statements that it sent to approximately 610 customers that certain corporate and municipal bonds were making interest or principal payments when, in fact, the bonds were in default. The investigation stated that the firm failed to establish and maintain a supervisory system reasonably designed to review the accuracy of account statements it sent to customers. Although the firm received notice when bonds held by customers had defaulted, it did not have any system to verify that such information was reflected in the system the firm used to maintain information about securities held by customers. In addition, from January 2010 through August 2020, Wedbush failed to deliver to a total of approximately 14,900 customers three types of annual notices and disclosures required by FINRA and SEC rules. The notices were available on the firm’s website. FINRA found that the firm did not have a supervisory system reasonably designed to achieve compliance with its obligation to deliver annual privacy notices, order execution disclosures, and margin disclosures. The firm’s WSPs required the firm to deliver the privacy notices, order execution disclosures, and margin disclosures to customers on an annual basis. However, the firm did not have any system to verify that such notices were sent to customers who elected to receive materials from the firm via its online platform. Instead, the firm relied on its vendor to deliver these required annual notices and disclosures to customers, but the firm did not take any steps to verify that its vendor had appended the required notices and disclosures to the account statements sent electronically to customers. Ultimately, the firm identified that customers had not been receiving the required notices and disclosures, implemented changes in its delivery process, and self-reported the issue to FINRA. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it negligently misrepresented the default status of bonds on customer account statements.
Harmed investors can call (800) 718-1422 or email [email protected] to discuss their legal options. All consultations are free and confidential. Most cases are handled on a contingency fee basis, meaning that clients are not obligated to pay attorney fees unless money is recovered on their behalf.