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FINRA fines Wedbush Securities $850K over misleading customer statements

On Behalf of | Nov 22, 2022 | Regulatory Investigations

The Financial Industry Regulatory Authority announced a settlement with Wedbush Securities over charges of misleading account statements, Financial Advisor reported.

In its letter of acceptance, waiver and consent, FINRA said that from 2013 to 2018, the Los Angeles-based firm “negligently misrepresented on monthly account statements that it sent to approximately 610 customers that certain corporate and municipal bonds were making interest or principal payments when, in fact, the bonds were in default.”

Wedbush was notified that the bonds were in default but did not pass along the information to the vendor used by the firm to maintain information about customers’ securities, according to FINRA. As a result, when the vendor’s data was used to generate the monthly account statements those statements did not reflect that the bonds were in default but misrepresented that they were making payments. It was also alleged that Wedbush did not reasonably review the accuracy of account statements even after being notified by a vendor that it was misreporting information.

The authority found Wedbush to be in violation of FINRA Rule 2010 and MSRB Rule G-17, while also violating FINRA Rules 4511 and 2010 and MSRB Rule G-8 by making inaccurate customer account statements.

In addition, FINRA said Wedbush did not have a supervisory system reasonably designed to review the accuracy of account statements it sent to customers.

Wedbush, a wealth management, brokerage and clearing firm with 40 branches nationwide, did not admit or deny the findings but agreed to pay $850,000 in fines and be subject to censure.

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