The Frankowski Firm is investigating potential claims against Wedbush Securities broker Mark Augusta for unsuitable and misrepresented sales of Puerto Rican municipal bonds and/or municipal bond funds to Wedbush customers. These bonds have declined precipitously in value, brought on by economic instability within the Commonwealth and worsened by the devastation of Hurricane Maria.
Because of the Commonwealth’s poor economic position, Puerto Rican municipal bond funds lacked the stability of traditional governmental bond funds and Puerto Rico has defaulted on over $200 million in bond payments to date. The rating agencies have downgraded Puerto Rican municipal bonds to below investment grade, or “junk,” status. Unlike typical municipal bond funds, the Puerto Rican municipal bond funds were not suitable for conservative investors seeking income and capital preservation from their investments, nor should they have comprised a high percentage of a customer’s portfolio.
The Frankowski Firm is concerned about Wedbush’s supervision of Puerto Rican municipal bond sales in light of other recent Wedbush supervisory failings highlighted by regulatory actions. Last month, the New York Stock Exchange’s regulatory body brought charges against Wedbush Securities Inc. and its owner, Edward W. Wedbush, for their alleged “knowing and systemic” failures to oversee and supervise Mr. Wedbush’s trading activity.
According to the allegations, Mr. Wedbush used a general account to enter orders, waiting until the end of the business day to allocate executed trades among roughly 70 accounts he actively managed – some of which were accounts for friends, family, and company employees, as well as personal and proprietary accounts.
Mr. Wedbush was allowed to make unsupervised and wholly-discretionary post-execution allocations which could steer profitable trades to Mr. Wedbush’s controlled accounts or for other improper purposes. No other Wedbush employees were permitted to make post-execution allocations in this manner and the firm allowed this to go on for years with no system to oversee or control Mr. Wedbush’s activity.
As described by an InvestmentNews article covering the charges, this is hardly Wedbush’s first time finding itself in regulatory crosshairs. The firm and Mr. Wedbush have a “long history of disciplinary actions related to supervisory deficiencies.”
Just within the past two years, Wedbush has paid over $2 million in fines and Mr. Wedbush himself served a one-month suspension for “extensive and widespread” supervisory failings related to regulatory filings and for “deficient supervisory systems and procedures governing market access and anti-money laundering requirements.”
Prior to that, Wedbush had paid regulatory fines of over $2 million in the preceding ten years in more than a dozen separate actions related to its supervisory failures.
If you or someone you know lost money in a Wedbush account as the result of unsuitable or misrepresented investments in a Puerto Rican municipal bond, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.