According to FINRA, Wedbush Securities Inc. was fined $150,000 for multiple violations including failure to maintain possession or control of customers' fully paid and excess margin securities, and failure to disclose required mark-up and mark-down information on customer confirmations.

The firm's most serious violation involved improper segregation of customer securities. Wedbush failed to combine credits and debits from separate accounts owned by the same customer under the same tax identification number before calculating securities available for rehypothecation. This error resulted in the firm overcalculating the number of shares available for its own use as collateral, creating deficits in customers' securities that should have been segregated. At times, these segregation deficits exceeded 100,000 shares and $2 million in value, placing customer assets at unnecessary risk.

The firm also violated customer protection rules by failing to establish systems to identify accounts owned by the same customer and to provide guidance to employees on proper segregation procedures. This lack of basic controls is particularly concerning given the fundamental nature of Rule 15c3-3 of the Securities Exchange Act, which exists to protect customer assets.

Additionally, Wedbush failed to disclose required mark-up and mark-down information on retail customer confirmations for municipal securities and corporate and agency debt securities transactions. These failures occurred because firm personnel did not timely enter the prevailing market price into the firm's order management system. The firm's written supervisory procedures contained no guidance on when to enter this critical pricing information, and the firm provided no training to supervisors on this requirement.

Investors should understand that customer protection rules exist to ensure their securities are properly segregated and protected from potential firm insolvency. Mark-up and mark-down disclosure requirements help investors understand the true cost of their transactions and evaluate whether they are receiving fair pricing.

Following FINRA's findings, Wedbush established new procedures related to Rule 15c3-3 compliance and amended its written supervisory procedures concerning customer confirmations.