Wedbush Securities to pay $6M over use of personal messaging apps
The Commodity Futures Trading Commission (CFTC) continues to take disciplinary actions against financial services firms for failing to ensure they had appropriate systems and controls in place to detect market abuse.
Today, the derivatives regulator ordered Los Angeles-based Wedbush Securities Inc, a provider of private and institutional brokerage in the US, to pay a fine of $6 million for various lapses over a period of at least five years. The charges pertain to widespread recordkeeping violations through employees’ use of personal devices and apps for work communications.
An investigation by CFTC found that Wedbush failed to stop employees, including senior staff and compliance personnel, from discussing work including those related to its commodities business via personal communication apps. These communications pertained to Wedbush’s activities as a CFTC registrant and were subject to CFTC-mandated recordkeeping.
Wedbush admitted to those charges, which were alleged to have taken place from 2018 to present, as well as it had failed to meet recordkeeping requirements for dealers registered with U.S. regulators. .
“As this action demonstrates, all CFTC registrants must comply with their fundamental recordkeeping obligations,” said Director of Enforcement Ian McGinley. “The CFTC’s recordkeeping and supervision requirements are central to its oversight of the U.S. derivatives markets and registrants. The CFTC will continue to pursue all registrants who fail to comply with these core obligations.”
This CFTC action aligns with a related order from the Securities and Exchange Commission (SEC) that also addresses recordkeeping and supervision violations by Wedbush and imposes a civil monetary penalty.
Wedbush is the latest Wall Street firm to incur penalties due to their employees’ uses of personal devices and off-channel communications. This development follows a broad investigation initiated in 2021 by regulators into the widespread use of these platforms. As a result of the probe, more than a dozen banks and brokers collectively agreed to pay roughly $2 billion to address such violations.
Founded in 1955, Wedbush Securities provides futures Execution and Clearing services to the world’s major futures exchanges, supporting a variety of clients, including non-clearing FCMs, introducing brokers, professional traders and institutions.
Wedbush Securities has recently ventured into the FX prime brokerage space by offering a new product that leverages its existing pool of liquidity capabilities and opens it up to institutional businesses.