After sparring in the court of public opinion about whether or not Wedbush Securities failed to comply with market rules regarding access, it looks like the matter will be settled quietly.
And soon.
According to Reuters report, a regulatory filing made on Wednesday between the U.S. biggest securities regulator and the California-based brokerage stated that the two are close to settling charges alleging the Wall Street firm had shoddy risk controls that let foreign traders access the market.
On Wednesday, Securities and Exchange Commission Administrative Law Judge Carol Fox Foelak filed the brief just a few weeks before Wedbush was set to fight the charges in court.
According to the filing, the SEC, Wedbush and Jeffrey Bell, a former vice president who oversaw the market access business, and Christina Fillhart, current senior vice president, “have reached an agreement in principle to settle on all major terms in the matter.”
Back in June, the SEC accused Wedbush with violating market access rules. These rules mandate that brokerages who provide their customers with direct access to the marketplace have “reasonable controls” in place. The SEC said in its claim that Wedbush failed to do so.
Also, FINRA charged Wedbush as well. It claimed that during the period from January 2008 to 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. Despite its obligations to monitor, review and detect suspicious and potentially manipulative trades, Wedbush largely relied on its market access customers to self-monitor and self-report such trading without sufficient oversight and controls to detect red flags.
Wedbush then fired back that it did not violate market access rules and that it complied with stated policies and guidelines.
While the end could be near for Wedbush vs. the SEC, Reuters noted that it is still unclear whether Wedbush will also be able to separately settle these FINRA-related market access charges filed against the firm in August.
Wedbush previously denied the allegations by both the SEC and FINRA.
