Wedbush Securities Inc., capitalized in 1955 with $10,000 from its co-founders, has grown over the last 60 years to have more than $4 billion under management. Its 82-year-old namesake founder still shows up at the office before dawn, putting in a full day on the trading floor.
But the firm’s rise and the dogged work ethic of President Edward Wedbush has come at a cost.
The company was accused late last month by a Texas financial services company of organizing a massive, illegal stock market manipulation scheme. The charge is the latest in a drumbeat of allegations that have dogged the firm since its founding. Wedbush has been cited by regulators 74 times for regulatory transgressions ranging from submitting inaccurate or incomplete reports to noncompliance with rules and regulations. The majority – 50 of the 74 – occurred within the last decade.
The latest charge, by a company for which Wedbush is a market maker, comes as both federal and industry regulators have issued new claims that the firm’s risk controls are shoddy and allowed thousands of foreign traders to execute manipulative trades in the U.S. market.
Wedbush said his firm has adjusted its business practices and is in compliance with both Securities and Exchange Commission and Financial Industry Regulatory Authority rules. He attributes the increase in regulatory run-ins with his company’s growing prominence.
“As your business gets more successful, more powerful and more complex, you’ll see more attention,” Wedbush said. “Regulation has increased in size but that doesn’t mean they’re always right.”
Right or not, the volume of complaints is what has caught the attention of regulators, clients and some former employees.
“Especially given the number of disciplinary actions against them by Finra, it is a firm that has had significant compliance problems,” said Emily Gordy, who until this month was the authority’s senior vice president of enforcement. “It’s not the norm. The vast majority of firms are trying to get it right on the compliance side.”
Indeed, the 74 regulatory actions the firm has faced over its history far exceed the number compiled by other local brokerage firms. Downtown L.A.’s Crowell Weedon & Co., which merged last year with Great Falls, Montana’s D.A. Davidson & Co., opened two decades before Wedbush. It has faced 18 complaints from federal, state or industry regulators in its history. That is the second-highest number among L.A. brokerages.
The problem, said Philip Aidikoff, a partner at Beverly Hills law firm Aidikoff Uhl & Bakhtiari, which has represented dozens of former Wedbush employees and clients in claims against the firm over the last decade, is one of culture.
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