← Broker database 2022-11-03
Wedbush Securities Fined $850,000 for Account Statement and Disclosure Failures
According to FINRA, Wedbush Securities Inc. was censured and fined $850,000 for negligently misrepresenting bond default status on customer account statements and failing to deliver required annual disclosures.
The firm generated and distributed monthly account statements that inaccurately represented that municipal and corporate bonds held by customers were making interest or principal payments when the bonds were actually in default. Although the firm received notice of the defaults, it failed to provide this information to the vendor maintaining securities information. Customers received default notices from a vendor but the defaults were not reflected on their account statements.
Wedbush failed to establish a supervisory system to review account statement accuracy. Even after becoming aware of red flags indicating incorrect reporting, the firm did not take steps to verify that account statements accurately reported bond default status and continued misreporting until it revised its procedures.
Additionally, the firm failed to deliver required annual privacy notices, margin disclosures, and order execution disclosures to customers who elected electronic delivery. The firm relied on a third-party vendor but failed to instruct the vendor to append required notices to electronically-delivered statements and did not verify delivery. Although these notices were available on the firm's website, that did not satisfy the delivery requirement.
Accurate account statements are fundamental to investor protection, enabling customers to make informed decisions about their holdings. This case demonstrates that firms must implement robust systems to ensure the accuracy of information provided to customers and verify that required disclosures are actually delivered, not merely made available.