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A broker-dealer agreed to settle SEC charges, originally filed in March 2018, for failing to supervise one of its registered representatives and for ignoring various red flags indicating that the representative could be involved in market manipulation.
According to the SEC Order, Wedbush Securities, Inc. ("Wedbush") was aware of aspects of a registered representative's manipulative trading of penny stocks, but Wedbush's supervisory policies and implementation systems failed to guide staff on how to properly investigate the activity and had no clear process for how to handle red flags of potential market manipulation. The Commission further found that Wedbush conducted two inadequate investigations into the registered representative's misconduct and failed to take action.
Wedbush agreed to be censured and to pay $250,000 to settle the charges. The settlement was entered on a neither-admit-nor-deny basis and the SEC acknowledged various remedial measures taken by Wedbush, including changes made to senior leadership, updated policies and procedures, and improved electronic surveillance.
Commentary / Kyle DeYoung
This settlement stands out for a couple of reasons. First, the case was originally filed as a contested action in March 2018 and was one of the administrative proceedings that were impacted by the Supreme Court's decision in Lucia v. SEC, which led to the Commission staying all of its pending administrative proceedings. Its resolution may be a sign that the SEC is making progress on putting the logjam of administrative proceedings resulting from Lucia behind it. Second, while firms routinely get credit for remedial measures taken in response to misconduct, it is unusual for the SEC to explicitly credit remedial actions taken by a firm after the SEC has filed charges.
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