(Bloomberg) — Wedbush Securities Inc. agreed to pay $2.44 million to settle U.S. regulatory claims that it failed to vet clients who broke stock market rules.
Wedbush admitted that it didnt have adequate risk controls before it allowed customers access to the market, the Securities and Exchange Commission said in a statement Thursday. The accord resolves the SECs June administrative claims against the Los Angeles-based firm.
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Jeffrey Bell, a former Wedbush executive, and Christina Fillhart, who still works at the company, agreed to pay a combined $85,000 for their alleged role in the matter, the SEC said. In settling the claims, Bell and Fillhart didnt admit to wrongdoing.
Broker-dealers who enjoy the benefits of being registered must honor the responsibilities that come with that status, and we will continue to hold responsible those who provide market access without implementing proper risk controls, Andrew Ceresney, director of the SEC Enforcement Division, said in a statement.
Phone calls and e-mails to attorneys for Wedbush, Fillhart and Bell werent immediately returned.
Wedbush, from July 2011 until at least January 2013, allowed dozens of firms with thousands of traders to place transactions that did not flow through any Wedbush systems before reaching exchanges and other trading venues in the U.S., the SEC said in the administrative order.
The company didnt have sufficient controls in place to prevent naked short sales, wash trades, money laundering and layering, in which bogus orders are quickly placed and canceled to manipulate prices, according to the SEC.
In a wash trade, one trader handles both sides of a single transaction, simultaneously buying and selling a stock with the possible goal of driving prices in a certain direction. Naked short sales involve failing to first borrow shares before selling a stock short.
