By Cyril Tuohy
The Securities and Exchange Commission (SEC) has announced that Los Angeles-based broker/dealer Wedbush Securities has settled a pending dispute by agreeing to pay $2.44 million and retain an independent consultant in connection with violations of market access rules.
In addition, Jeffrey Bell, Wedbush's former executive vice president, and Christina Fillhart, the company's senior vice president, have also agreed to pay more than $85,000 in penalties in connection with the violations, the SEC said in a news release.
Andrew J. Ceresney, director of the SEC’s Enforcement Division, said Wedbush admitted that it had “granted access to thousands of overseas traders without having appropriate safeguards in place.”
In a statement posted on Wedbush’s website, the company said it is “satisfied with the resolution of the administrative proceeding brought against it” by the SEC.
“The firm has always taken seriously its obligations under the federal securities laws, and has taken and will continue to take the necessary steps to address the issues identified as a result of this matter,” the company said.
It is the first time Wedbush had ever been subject to SEC enforcement action, “settled or otherwise,” the company said.
Wedbush Securities Inc., a subsidiary of Wedbush Inc., was founded in 1955. It registered with the SEC as a broker/dealer in 1966 and as an investment advisor in 1970. At the end of 2012, the company had 79 branch offices and 844 employees.
In a June 6 complaint, the SEC said that between July 2011 and January 2013, Webush gave traders access to financial exchanges without passing through Wedbush’s system, and that the company’s risk practices were inadequate.
The SEC's Market Access Rule, adopted in 2010, requires companies to implement risk management controls and to supervise and document procedures.
In 2004, Wedbush began sponsoring market access for customers. This allowed traders to send orders that bypassed Wedbush’s trading systems but were routed to exchanges under a Wedbush identification number, the SEC said.
In 2004, Wedbush had about 50 “sponsored access” customers, each employing hundreds or thousands of traders. These sponsored access customers generated an average monthly trading volume of 10 billion shares.
In August, financial industry regulators also filed suit against Wedbush Securities for supervisory lapses and anti-money laundering violations in connection with the Market Access Rule. The complaint is still pending, said a spokeswoman for the Financial Industry Regulatory Authority.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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