Aug 19 (Reuters) - Brokerage firm Wedbush Securities rejected Financial Industry Regulatory Authority’s (FINRA) charges, saying its risk management controls were consistent with the regulator’s guidance.
Wall Street’s self-funded regulator on Monday charged Wedbush with having shoddy risk controls and violating market access rules, that in turn allowed thousands of traders to flood U.S. markets and execute manipulative trades.
Market access rules were put in place in 2010 by the Securities and Exchange Commission as one of the responses to the “flash crash” that year in which the Dow Jones Industrial Average plunged by about 700 points before sharply rebounding.
The rules require brokerages that provide customers with direct access to the market to have reasonable controls in place.
Wedbush said on Tuesday the dispute stemmed from trading activity by certain clients that held market access accounts through its Advanced Clearing Services business.
The brokerage said it terminated many of these accounts nearly two years ago.
“To our knowledge, the trading activity at issue did not result in any losses to any other market participants, to Wedbush Securities or to its clients,” Wedbush said in a statement.
FINRA’s allegations are wholly unrelated to the firm’s Capital Markets and Private Client groups and have no bearing on client financial safety, Wedbush said.
Wedbush, one of the largest firms by trading volume on the NASDAQ stock exchange, became the second firm to face charges over market access rules by the SEC after KCG Holdings. (Reporting By Neha Dimri in Bangalore; Editing by Saumyadeb Chakrabarty)