The SEC charged a broker-dealer for failing to take action against a registered representative who conducted a pump-and-dump scheme.

According to the SEC, Wedbush Securities, Inc. ("Wedbush") failed to adequately supervise a registered representative and ignored various red flags indicating that the representative could be involved in market manipulation. The SEC found that Wedbush was made aware of the potential misconduct through (i) an email that described the representative's role in fraudulently affecting the price of certain penny stocks, (ii) two FINRA arbitrations filed by the representative's customers due to actions concerning penny stocks, (iii) a FINRA inquiry into the representative's personal trading in one of the penny stock issuers and (iv) another FINRA inquiry into allegations linked to the two arbitrations. The SEC alleged that Wedbush did not have appropriate policies or procedures in place to investigate and address the misconduct.

In a separate action, the representative agreed to settle SEC charges for participating in a conspiracy to solicit brokerage clients to invest in certain microcap securities for the purpose of manipulating the price of the securities. While making no admissions, the representative agreed to pay a $50,000 penalty and accept an industry bar.

The SEC charged fifteen individuals and entities in the alleged conspiracy. Eleven individuals have pleaded or been found guilty in criminal cases.

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