Wedbush Reaches $8.1M Settlement With SEC Over American Depositary Receipts Mishap
The SEC has hit another financial institution with a multimillion-dollar penalty over alleged abusive ADR prerelease practices.
June 18, 2019 at 06:16 PM
3 minute read
Wedbush Securities Inc. has settled with the U.S. Securities and Exchange Commission for more than $8.1 million over charges the financial services company mishandled prereleased American depository receipts, the agency announced Tuesday.
It is the latest in a series of SEC settlements as the agency carries on an investigation into financial institutions' mishandling of American depository receipts, a U.S. depository bank-issued certificate representing shares in a foreign companies' stock.
“In today's action, we charge that Wedbush facilitated the issuance of ADRs that were not backed by ordinary shares,” said Sanjay Wadhwa, the senior associate director of the SEC's New York Regional Office, in a press release. “As this investigation has shown, Wedbush was one of numerous market participants that should have known its actions left the ADR markets ripe for abuse.”
According to the SEC, the Los Angeles-based financial services company obtained prereleased ADRs when neither Wedbush nor its customers owned the foreign shares to back up the securities. Wedbush's alleged actions led to a false inflation of the foreign issuer's tradable securities and, eventually, improper trading strategies such as short selling and dividend arbitrage.
Without admitting or denying charges that Wedbush violated the Securities Act of 1933, the company agreed to pay more than $4.8 million in disgorgement for wrongdoing, $800,000 in prejudgment interest, and a more than $2.4 million penalty.
“Wedbush takes seriously its obligations under the securities laws and we are pleased to resolve this matter relating to conduct that we voluntarily ceased in 2013,” said Wedbush co-presidents Rich Jablonski and Gary Wedbush in a statement. “This is one of several legacy regulatory matters that our leadership team has sought to resolve so that we can continue to focus on serving our clients to the best of our ability.”
So far, the SEC has brought action against 11 banks and brokers. Earlier this year, Bank of America-owned Merrill Lynch coughed up more than $8 million over alleged ADR mishandling. JPMorgan Chase Bank, Bank of New York Mellon, Deutsche Bank and Citibank have also faced recent SEC action. The settlement total exceeds $422 million.
The agency said Tuesday that it will continue its focus on abusive ADR prerelease practices. The SEC's investigation is led by a team from its New York Regional Office and supervised by Wadhwa.
Read More:
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllHealth Care Giants Sue FTC, Allege Lina Khan Using Loaded Process to Vilify Pharmacy Benefit Managers
3 minute readPorsche's Venture Capital Arm Adds General Counsel From Clifford Chance
How a 200,000-Worker Global Enterprise Took Down the Silos and Made ESG Its Mission
4 minute readCorporate Counsel's 2024 Award Winners Performed Legal Wizardry, Gave a Hand Up to Others
Trending Stories
- 1'The Show Must Go On': Solo-GC-of-Year Kevin Colby Pulls Off Perpetual Juggling Act
- 2Legal Speak at General Counsel Conference East 2024: Match Group's Katie Dugan & Herrick's Carol Goodman
- 3Legal Speak at General Counsel Conference East 2024: Eric Wall, Executive VP, Syllo
- 4Battle for Top Talent Accelerates Amid Profit and Demand Surge
- 5Friday Newspaper
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250