The Securities and Exchange Commission (SEC) has accused Los Angeles-based brokerage firm Wedbush Securities for failing to supervise a broker who may have been involved in the Wedbush pump-and-dump scheme.
Wedbush will face a public hearing regarding whether it lacked reasonable supervisory policies and if it conducted insufficient investigations into the employee’s conduct. The employee, Timary Delorme, has been barred from the securities industry and will pay $50,000 in civil penalties.
Wedbush Pump-and-Dump Scheme Allowed to Continue
The SEC alleges that Wedbush was aware that Delorme was taking part in the Wedbush pump-and-dump scheme that manipulated the price of penny stocks but took no action. Instead, Wedbush allowed the broker to continue with her potential misconduct.
According to the SEC filing, an email outlined Delorme’s role in the scheme alongside Wedbush broker Zirk Engelbrecht. Engelbrecht has a history of criminal charges related to separate actions.
Delorme participated in the scheme by making trades to manipulate the price and volume of stocks. For her participation, Delorme received undisclosed benefits, paid to her husband, for recommending Engelbrecht-controlled issuers to her customers.
Wedbush Securities Sees Multiple SEC Actions
This latest matter marks the third regulatory action against Wedbush in 4 years. In 2014 the firm paid $2.44 million to settle charges that it violated market access by failing to have proper risk controls in place before giving customers direct access to the markets through its systems.
Earlier this year, FINRA handed Wedbush a $1.5 million fine for violating SEC customer- protection and net-capital rules. The firm also was hit with a NYSE complaint in 2017 alleging that the company failed to oversee and supervise the trading activities of its founder and namesake, Edward W. Wedbush.
In 2016, the firm and its president, Edward Wedbush, were fined $350,000 for failing to file forms requested by FINRA that documented customer complaints against the firm and its representatives. That same year, FINRA issued a $675,000 fine for supervisory violations related to a client's redemption and trading of leveraged exchange-traded funds. Ed Wedbush himself also paid a $50,000 fine and was suspended as a principal for 31 days for supervisory deficiencies related to regulatory filings.
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Dimond Kaplan & Rothstein has been active in pursuing claims against Wedbush Securities and has recovered investment losses for numerous clients who have suffered as a result of Wedbush’s misconduct.
If you believe you are a victim of the Wedbush pump-and-dump scheme or believe you lost money as a result of Wedbush Securities misconduct, contact an experienced securities fraud attorney today.
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