The following disciplinary action was taken against both Wedbush Securities, Inc and one of its registered representatives, (“RR”) due to violations of Section 17(a)(1) and (3) of the Securities Act, Sections 9(a)(2) and 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder.
Wedbush Securities, INC.
The Firm was fined $250,000 for failing to reasonably supervise one of its RR, Timary Delorme. Becoming aware of Delorme’s manipulation in trading activity of penny stocks, Wedbush Securities, Inc., was unable to adequately implement its supervisory policies and implementation systems to guide staff on how to investigate the activity as its investigation policies and procedures were heavily flawed. Supervisors observed several red flags by reviewing emails outlining her role in fraudulent transactions, receiving copies of FINRA arbitrations filed by her customers in regard to the same penny stock issuers, as well as learning of a FINRA inquiry into Ms. Delorme’s personal trading and customer allegations all in connection with the same penny stock investments. With further allegations made by customers with text message evidence, Ms. Delorme was found to be manipulating securities in customer and personal accounts, guaranteeing profits. The SEC order goes on to indicate that Ms. Delorme falsified trading creating greater volume and increase in securities prices, while encouraging customers to buy stocks in exchange for undisclosed compensation. Wedbush failed to develop and implement a clear process that would guide staff to effectively detect and prevent violations as well as handling red flags and market manipulation. From lack of documentation and coherent investigation processes, Ms. Delorme was able to continue acting in violation of various sections of the Securities Act, deeming it necessary for remedial measures for Wedbush. Case #3-18411
On March 27, 2018 Ms. Delorme entered into a settlement agreement with the SEC in which she agreed to a cease and desist from committing or causing violations of future violations and is barred from association with any broker, dealer, investment adviser, municipal advisor, transfer agent, or national recognized statistical rating organization. Ms. Delorme is also barred from participating in any offering of penny stocks and is required to pay $50,000 in civil penalties. Case #3-18410
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