FINRA fines Wedbush Securities for misreporting of short positions

Maria Nikolova

On a number of occasions from March 2016 through October 2016, the company misreported its short positions in equity securities.

The United States Financial Industry Regulatory Authority (FINRA) has imposed a fine of $90,000 on Wedbush Securities Inc. for violations of short positions reporting requirements. The fine is a part of a settlement of the alleged rule violations.

During the period March 31, 2016 through October 14, 2016 (the review period), Wedbush Securities misreported its short positions in equity securities, which must be reported pursuant to FINRA Rule 4560.

FINRA Rule 4560 requires firms to maintain and periodically report information regarding short positions in all customer and proprietary accounts. FINRA requires that these be reported twice per month. The rule provides that firms shall only report short positions that have settled or reached settlement date as of the close of the relevant reporting settlement date.

During the review period, Wedbush Securities used a system for recording same-day purchases and sales of equities pursuant to which it created offsetting purchases and sales, recording the purchase in the customer’s margin account and the sale in the customer’s cash account. The positions were netted out the following day when the trades settled.

Under this system, the cash account would appear to be short in the security, and the company’s system for reporting short positions did not offset these unsettled sell orders by the corresponding long position in the customer’s margin account. As a result, the company misreported its short positions in equities on all 14 of the bimonthly reporting dates during the review period. It reported a total of 1,911 short positions totaling 23,640,682 shares but should have reported only 1,704 short positions totaling 21,157,936 shares. Thus, it overstated its short positions by a total of 2,482,746 shares and overstated the number of accounts with short positions by 207.

In addition to the fine, the company has agreed to a censure.

Wedbush Securities has disciplinary history related to short interest reporting.

In September 2013, FINRA reached a settlement with the company, whereby Wedbush Securities was censured and fined a total of $87,500, including a $42,500 fine for short interest reporting violations and a $12,500 fine for supervisory deficiencies during the period June 30, 2008 through June 30, 2010.

In September 2017, FINRA accepted a settlement offer in which Wedbush Securities was censured and fined a total of $470,000 for three different violations, including short interest reporting and supervision of short interest reporting during the period July 2010 through October 2013.

Read this next

Retail FX

Finalto sweetens offering for African traders with localized FX pairs

Finalto, the financial trading division of Gopher Investments, announced today that it has extended its offering with inclusion of a number of African Pairs to its trading platforms.

Digital Assets

BitMEX secures OAM registration to operate in Italy

Crypto exchange BitMEX has won regulatory approval from Italy’s financial regulators, allowing the exchange to continue serving Italian customers.

Institutional FX

FlexTrade integrates Glimpse’s post-trade bond execution data

“Looking further ahead, this integration also presents multiple opportunities for how fixed-income traders could leverage the trading data. For example, traders could tap Glimpse data as an input to AI-driven automation workflow strategies in the future.”

Industry News

FINRA fines UBS $2.5m for Reg SHO violations and supervisory failures

FINRA has fined UBS $2.5 million for Reg SHO violations and supervisory failures spanning a period of nine years.

Digital Assets

Bitfinex Pay launches feature that minimizes volatility risk

The currency conversion will take place every five minutes on any amount above $10.

Digital Assets

Mastercard launches Crypto Secure for risk assessment in digital asset space

“Crypto Secure will provide card issuers with a platform that allows them access to insights which will improve the safety of crypto purchases, increasing consumer confidence and creating the same trust they expect when paying with Mastercard.”

Retail FX

VT Markets wins 4 more awards including Best Forex Mobile App Global 2022

“Over the past few months, we have noticed a huge spike in downloads and daily active users on the VT Markets App. Our clients can trade multiple asset classes with ultra-low spreads, and access timely market news on our mobile app.”

Institutional FX

Blue Ocean ATS enhances price discovery and liquidity for after hours US stock trading

Liquidity and price discovery, missing from previous overnight trading solutions, are now possible utilizing the TNS network and managed service platform. Security of the private network and its access to all public clouds, uniformity of compliance and regulatory oversight, redundancy and recovery capabilities, plus the localized customer service around the world made TNS the best candidate for this major step in Blue Ocean Technologies’ growth.

Executive Moves, Retail FX

Equiti Group wins CySEC license to expand into Europe

“Regulation and good governance have always been and will continue to be a key part of Equiti’s business model.”

<