SEC Enforcement: Wedbush Settles SEC Probe for $2.4M, High-Frequency Trading Firm Gets $16M Penalty, and the Regulator Suspends Companies Touting Ebola Treatment
Wedbush Settles Market Access Violation Case for $2.44M
Wedbush Securities has agreed to settle a market access violations case with the U.S. Securities and Exchange Commission by admitting to wrongdoing and paying $2.44 million. The brokerage firm has also agreed to hire an independent consultant.
According to the SEC order, Wedbush violated the market access rule because it didn’t have the proper risk controls in place before giving customers access to the market. Among the customers that were given this access were thousands of anonymous overseas traders.
Per the SEC’s order instituting administrative proceedings, from July 2011 into 2013, Wedbush let most of its market access customers send orders straight to U.S. trading venues via platforms to which the firm did not have exclusive and direct control.
Also settling with the SEC ex-Wedbush executive vice president Jeffrey Bell and senior VP Christina Fillhart, who are accused of causing the firm’s violation of market access rules. The SEC said that Bell should have known that the firm’s risk management controls and supervisory procedures were not in compliance with the market access rule.
The agency claims that Fillhart, whose job it was to oversee the market access business and get notice of possible violations by Wedbush and its customers, did not get the firm to implement reasonably designed risk management controls even when there were red flags. In combined total, the two of them will pay over $85,000 in disgorgement, penalties, and prejudgment interest.
SEC Imposes $16M Penalty Against High-Frequency Trading Firm Latour
In the SEC’s first enforcement action against a high-frequency trading company, Latour Trading LLC will pay a $16M penalty. The regulator claims that the high-frequency trading firm employed faulty calculations in complex trading strategies, which allowed it to purchase and sell stocks without retaining substantial capital. The SEC says that the New York firm violated rules that are supposed to prevent trading firms from taking on too much risk.
By settling, Latour is not denying or admitting wrongdoing. The $16 million penalty, however, is the largest one to date for violating the net capital rule. The rule offers different methods that brokerage firms must employ to ensure that they are properly factoring in the risk they are exposing themselves to when engaged in the market. The Commission says that Latour routinely violated these requirements in 2010 and 2011.
The SEC also charged Nicolas Niquet, the ex-Latour COO, with violating the net capital rule. Niquet, who designed the method that Latour employed to determine risks exposure to net capital, must pay a $150,000 fine.
Trading is Suspended in Companies Involved in Supposed Ebola Treatment or Prevention
The Commission has suspended trading in four companies claiming to develop services or products related to the treatment or prevention of the Ebola outbreak. The agency said there wasn’t enough information available to the public about their operations. The four companies are Bravo Enterprises, Wholehealth Products, Immunotech Laboratories, and Myriad Interactive Media Inc.
The SEC has put out an Investor Alert warning about financial scams involving Ebola-related companies. In the alert the agency noted that it is not uncommon for fraudsters to try taking advantage of a news development. The SEC noted that microcap stocks are especially at risk of fraudulent investment schemes.
Investor Alert: Investment Scams Involving Ebola-Related Companies, SEC, November 20, 2014
High-Frequency Trading Firm Latour to Pay $16 Million SEC Penalty, The Wall Street Journal, September 17, 2015
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