Wedbush Securities Inc. out of Los Angeles has agreed to pay a fine of $850,000 to the Financial Industry Regulatory Authority to settle allegations that the firm misled clients for years into believing they were earning interest on defaulted corporate and municipal bonds.
FINRA stated that Wedbush sent incorrect account statements to approximately 610 costumes each month between 2013 and 2018. Despite the fact that Wedbush knew that bonds in the customers’ accounts had defaulted (stop making interest payments), the Wedbush account statements incorrectly reflected that the defaulted bonds were making interest payments.
The failure to notify customers of defaults on 38 different bonds violated FINRA's rules and those of the Municipal Securities Rulemaking Board, according to FINRA.
The $850,000 fine includes not only the bond issue but also separate allegations that approximately 15,000 Wedbush customers not receive mandatory disclosures for a decade.
The U.S. Securities and Exchange Commission requires that the business submit yearly disclosures of its privacy policies from 2010 through 2020. According to FINRA, the firm failed to do so from 2010 through 2020.
FINRA also criticized Wedbush for allegedly neglecting to advise customers about the routing of orders or to provide yearly notifications to non-institutional investors about the risks and processes associated with trading stocks on margin. FINRA said that the disclosure breaches included a communication problem with a Wedbush vendor responsible for providing customer account statements.
FINRA said that "Wedbush was responsible for supplying the vendor with mandatory notifications and disclosures to include with client account statements," but failed to do so.
Contact an Experienced Stockbroker Fraud Lawyer
If you were misled by Wedbush’s faulty account statements, contact an investment fraud lawyer at at Dimond Kaplan & Rothstein, P.A. for a free consultation. DKR represents investors throughout the United States and Latin America in stockbroker fraud and brokerage firm misconduct cases. Our offices are located in Miami, Los Angeles, West Palm Beach, New York, Naples, and we represent clients nationwide. Translation services are available.