Wedbush Securities and the firm's president lost their appeal of a FINRA enforcement decision imposing more than $300,000 in fines and a month-long suspension of the top executive for failing in their reporting duties.
Last week Edward Wedbush and his namesake firm were unable to overturn a 2012 decision by a FINRA hearing panel that had found the firm liable for failure in its accurate and timely reporting of customer complaints, employment registration of registered representatives and statistical files. Wedbush and the firm also were found to have failed in their supervision of the reports.
The decision had included a $300,000 fine for the firm and $50,000 for Wedbush. He also was suspended of supervisory duties for 31 days. Both were ordered to pay hearing costs of $14,930.
FINRA's appeals division, the National Adjudicatory Council, added another $1,591 in appeal costs which the firm and Wedbush must pay. His suspension is set to start in mid-February.
Calls to the firm for comment were not returned.
According to FINRA records, the firm failed in its accurate and timely filing of U4 and U5 forms for its advisors. FINRA said the firm was liable for more than 100 reporting violations, and noted that accurate filing is necessary for self-regulatory organizations, broker-dealers and investors to evaluate advisors.
"The information on the Form U4 also is important to member firms, when evaluating whether to hire an employment applicant, and the investing public, who have access to certain disclosure on FINRA's BrokerCheck, when evaluating a broker," the agency said.
Wedbush and the firm had disputed five alleged violations involving client complaints, according to FINRA records. In one instance, a client faxed a letter in March 2009 to the firm, alleging that his broker had committed unauthorized trades. A report of the complaint wasn't made until January 2010, 275 days later.
According to records, Wedbush and the firm "conceded that the complaint was not timely reported. However, they also disputed their responsibility for the late reporting. Both asserted that a firm office manager failed to forward the letter to the business conduct department, after he concluded it wasn't a customer complaint.
The agency disagreed. FINRA found "[t]he office manager's failure does not excuse the late filing or the firm's responsibility for the late filing."
FINRA documents indicate the period of alleged misconduct occurred from Jan. 2005 to July 2010. In addition to serving as president, Wedbush was the firm's business conduct manager from Aug. 2006 to Sept. 2007, and chief compliance officer from Aug. 2006 to July 2007. He then became the firm's co-chief alongside Vincent Moy until handing off the position four months later to Eric Segall. Segall also took over as business conduct manager.
The firm had argued that Wedbush was not liable for failure to supervise, because his was more of a managerial role than supervisory. FINRA again disagreed, saying that as president he was ultimately responsible.
The NAC concurred.
"We find that the numerous regulatory notifications and continued regulatory reporting violations after Segall and Moy joined the firm provided Mr. Wedbush with ample notice that they were not properly performing their supervisory duties."
Wedbush and Robert Werner founded the Los Angeles-based brokerage in 1955, and have approximately 1,000 employees on staff.
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