FINRA Wedbush Client Assets

On Feb. 5, FINRA fined Wedbush $1.5mn for client asset violations.

  • To punish violations of Customer Protection and Net Capital Rules, and related supervisory
    and books and records failures over period of 2009-2016, several consumers defrauded.

Customer Protection, Net Capital Rule

  • Broker-dealer obligated to protect customer assets as custodian for investments must
    be segregated in a 'control location," free of liens, encumbrances, reserve of cash need.
  • Must maintain minimum amount of net capital, computed based on specified formulas.


  • 2011 to 2016, Wedbush failed to accurately calculate customer reserve requirement
    on 84 occasions, underfundedcustomer reserve account 73 times by $2 million to $77mn.
  • 5-month period in 2015-2016, net capital deficient, ranging between $10.5mn and $59.4mn.
  • Due to failure to take required deductions when valuing certain CDs as formulas would have.
  • Included ineligible assets in customer reserve account, underfund 110 times, $9mn to $375mn.

Compliance, Supervisory Failures

  • Failed to establish, maintain supervisory systems, procedures reasonably designed to ensure
    compliance with two rules exposed customer funds, securities to risk undetected for 7 years.


  • Neither admit nor deny but consented to the charges, paid $1.5 million fine for behaviour.