Wedbush to Pay $1.2M for Microcap Unregistered Offers and Sale

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Wedbush Securities has agreed to a payment of $1.2 million demanded by the Securities Exchange Commission for the distribution of microcap shares in the millions, deemed to be an unlawful act. Wedbush has consented to the findings, without admittance or denial, as per the information shared by SEC.

Wedbush participated in the sales of securities and unregistered offers made by Silverton SA, a former offshore customer. This was done by them without undertaking a review and evaluation of the offered securities, as stated by SERC in a recently published administrative proceeding document.

The period during which these activities were carried out has been established to be between January 2017 and September 2018. During this period, about a hundred million shares, of 50 different low-priced microcaps, were distributed by Wedbush.

According to the SEC, Wedbush’s apparent failure to enquire about the sales, rendered the securities unqualified for the registration exemption that broker transactions are generally eligible for.

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Compounding the issue was their failure to file a suspicious activity report for a few transactions they carried out for Silverton, despite there being an adequate reason to believe they would qualify for the filing.

The $1.2 million ask for violation of recordkeeping requirements as well as registration provisions, is broken down as follows:

  • $1 million civil penalty
  • $207K+ as disgorgement and prejudgment interest

The SEC has further informed that parallel actions have been brought by them against several ‘related parties’ along with the U.S. Attorney’s Office for the District of Massachusetts in 2018. These include Roger Knox, principal of Silverton SA. The action pertains to an apparently fraudulent scheme of illegal unregistered offer and sale of low-priced microcaps, preceded by the depositing of blocks of these shares.

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