Wedbush's Recordkeeping Blunders Lead to Multi-Million Dollar Fines by US Watchdogs

<p>Tuesday
proved to be exceptionally unlucky for the Los Angeles-based registered futures
commission merchant, Wedbush Securities Inc., which faced challenges from two
regulatory fronts. First, the Commodity Futures Trading Commission (<a href="https://www.financemagnates.com/terms/c/cftc/">CFTC</a>)
imposed a penalty of $6 million, followed by a $10 million fine from the
Securities and Exchange Commission (SEC). This comes in response to the
company's consistent failures to maintain essential records and a lack of
proper oversight in business dealings as a CFTC registrant.</p><p>Wedbush Fined for
Widespread Use of Unapproved Communication</p><p>From 2018
onwards, senior-level employees at Wedbush have used unauthorized communication
channels, including personal text messages, to discuss matters pertinent to the
company's role as a <a href="https://www.financemagnates.com/tag/cftc/" target="_blank" rel="follow">CFTC registrant</a>. This method of communication goes against
the grain of what is stipulated under the CFTC's strict recordkeeping mandates.</p><p>The
investigation revealed that <a href="https://www.financemagnates.com/tag/wedbush-securities/" target="_blank" rel="follow">Wedbush </a>failed to keep or archive thousands of
these communications, some of which were related directly to its commodities
business. If asked by a CFTC representative, Wedbush would have been
hard-pressed to present these communications promptly.</p><p>Due to the company's
unapproved communications and failure to maintain necessary records, Wedbush
fell short in supervising its operations aligned with its responsibilities as a
CFTC registrant. This lapse contravenes the CFTC's recordkeeping and
supervision guidelines.</p><p>"As
this action demonstrates, all CFTC registrants must comply with their
fundamental recordkeeping obligations," Ian McGinley, the Director of
Enforcement at the CFTC, commented. "The CFTC's recordkeeping and supervision
requirements are central to its oversight of the U.S. derivatives markets and
registrants. The CFTC will continue to pursue all registrants who fail to
comply with these core obligations."
</p><p>In a
parallel development, the Securities and Exchange Commission (SEC) has announced that it has raised charges against Wedbush, imposing additional penalties for similar
recordkeeping and supervision infringements. The company has agreed to pay a
fine of $10 million.</p><p>SEC Fines 11 Wall Street
Firms</p><p>The penalty
imposed by the watchdog on Wedbush was part of a broader regulatory action
undertaken by the <a href="https://www.financemagnates.com/tag/sec/" target="_blank" rel="follow">SEC</a>, which levied fines on a total of 11 Wall Street firms
due to recordkeeping failures. The cumulative amount of the fines <a href="https://www.financemagnates.com/institutional-forex/sec-fines-11-wall-street-firms-for-alleged-recordkeeping-violations/" target="_blank" rel="follow">reached $289
million</a>, with the largest penalty being paid by Wells Fargo Securities and its
affiliated companies, amounting to $125 million.</p><p>"Compliance
with the books and records requirements of the federal securities laws is
essential to investor protection and well-functioning markets," Gurbir S.
Grewal, the Director of the Enforcement Division of the SEC, commented. "To
date, the Commission has brought 30 enforcement actions and ordered over $1.5
billion in penalties to drive this foundational message home."</p><p><a href="https://www.financemagnates.com/forex/when-algorithms-rule-finance-sec-fears-ai-driven-conflict-of-interest/" target="_blank" rel="follow">In a separate
announcement</a>, the SEC stated its readiness to implement regulations that
mandate broker-dealers and investment advisers to address potential conflicts
of interest stemming from their utilization of predictive data <a href="https://www.financemagnates.com/terms/a/analytics/">analytics</a> and
comparable technologies.</p>

This article was written by Damian Chmiel at www.financemagnates.com.