[ by Howard Haykin ] A FINRA hearing panel handed down a 31-day suspension to Edward Wedbush, the founder and president of the L.A.-based broker-dealer.  The suspension applies to his activities as a supervisory principal.  Mr. Wedbush was charged by FINRA with failure to adequately supervise the firm's regulatory filings which allegedly, in many cases, were late or inaccurate.  FINRA further issued a $25K fine against Mr. Wedbush and a $300K fines against the firm.  "The action is under appeal. Wedbush, a unit of WEDBUSH Inc. The broker-dealer has about 900 employees and 4 divisions.  According to the firm's web site, parent company, Wedbush, Inc., is a leading financial services and investment firm that, through its holdings, provides private and institutional brokerage, investment banking, research, clearing and execution, private capital, commercial banking, and asset management to individual, institutional and issuing clients. Lawyers' Takes on the Disciplinary Action. Mike McAllister, a partner with Satterlee Stephens Burke & Burke LLP who's not involved in the case, observes the "very unusual" nature of suspending the head of a brokerage or financial company - in any capacity.  However, heads of small or mid-sized firms, like Wedbush Securities, are more at risk for such penalties - compared with those at larger firms - because of their frequent involvement in running the business. Robert Frenchman, a Partner with Bracewell & Giuliani in New York, who also is not involved in the case, said, that while Mr. Wedbush will be allowed to supervise trading and the entry of customers' securities orders, the suspension will still hinder his oversight.  For example, he'll be unable to approve many business activities or make a range of hiring and firing decisions.  The suspension and fines do not take effect until the first appeals have been completed. FINRA Findings and Allegations. FINRA Enforcement filed the case against Wedbush Securities in 2010, 8 years after regulators began finding problems. "While the problems were not ignored, they were not fixed," wrote the hearing officer. Regulators knew of problems since 2002, although the case focused on violations between 2006 and 2010.  FINRA found that the firm was late in reporting customer complaints, and was late to report the results of litigation in which the firm was involved.  The hearing officer noted in his order that Wedbush "offered many of the same excuses" and commitments to improve its procedures but, in the end, "there was no meaningful improvement" in its compliance. In 2009, for example, the firm was 275 days late to report one customer's complaints about unauthorized trading and another customer's complaint about unsuitable investments for a client's elderly mother.  FINRA held Edward Wedbush partly responsible for those violations, because he managed the brokerage's business conduct department during the period in question, was the firm's president, was served as CCO from 2006 to 2007. All told, FINRA's hearing panel counted over 100 instances in which Wedbush didn't file mandatory forms and reports, or was inaccurate or late. Some involved customer  complaints about improper sales practices.

- e.g., Wedbush allegedly waited almost a year to disclose that a broker it hired in 2009 pled "no contest" to misdemeanor burglary 14 years earlier.  Wedbush responded that it "took some time to determine if the matter was reportable."

- e.g., Wedbush also was 5 years late to report that a lawsuit alleging market manipulation against the company and Edward Wedbush had been dismissed after the parties settled - although Edward Wedbush was "not guilty" when there was never a finding that he was not liable, according to the order.

For further details, go to:  [Reuters, 8/7/12].