The Commission’s inspection program, conducted by the Office of Compliance Inspections and Examinations or OCIE, has been the source of a number of enforcement actions. One example is the recently filed case against dark pool operator. In the Matter of Liquidnet, Inc., Adm. Proc. File No. 3-15912 (June 6, 2014), Another is the action brought against Wedbush Securities, Inc. and two of its employees based on claims that the firm failed to comply with the market access rule. In the Matter of Wedbush Securities Inc., Adm. Proc. File No. 3-15913 (June 6, 2014).
The Respondents are the broker dealer, one of the largest providers of market access in the United States, and Jeffrey Bell and Christina Fillhart. Mr. Bell is an executive vice president of the correspondent serviced division of the firm which is responsible for market access. Ms. Fillhart is a senior vice president in the same division.
The Market Access Rule, adopted in late 2010, generally requires that broker-dealers appropriately control the risks associated with market access to avoid jeopardizing their financial condition, that of others or the integrity and stability of the market. Wedbush had about 50 sponsored access customers that generated average monthly trading volume of 30 billion shares. Several of the firms sponsored access customers had more than 1,000 authorized traders. One had over 10,000 traders. This was one of the most profitable operations of the firm. Most of the customers used either their own proprietary trading platform or that of a third party, leased from a service bureau. Thus most of the orders from Wedbush’s sponsored access customers did not flow through its risk management systems.
Here the Order alleges that the firm violated the Market Access Rule, and the individual Respondents caused the violations, despite a warning from the inspection staff, since:
The Order alleges violations of Exchange Act Section 15(c)(3), 17(a) , 21C(A) and the related rules. The proceeding will be set for hearing.
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