CHICAGO BOARD OF TRADE
NOTICE OF DISCIPLINARY ACTION
FILE NO.: 16-CH-1607
MEMBER FIRM: Wedbush Securities Inc.
CBOT RULES: 951. DISCLOSURE REQUIREMENTS
Each clearing member must comply with all disclosure requirements set forth in applicable CFTC and NFA Rules and Regulations.
958. BRANCH OFFICES, GUARANTEED INTRODUCING BROKERS, AND ASSOCIATED PERSONS
C. Each clearing member must diligently supervise its branch offices, guaranteed introducing brokers, and the associated persons of the clearing member and its guaranteed introducing brokers.
970. FINANCIAL REQUIREMENTS
A. Subject to exemptions granted by Exchange staff, all clearing members, including nonFCMs, must comply with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17 and 1.18. This includes, but is not limited to, the following:
1. Maintenance of minimum capital requirements of at least $5 million except that a clearing member that is a bank must maintain minimum Tier I Capital (as defined in accordance with regulation applicable to the relevant bank) of at least $5 billion.
3. Notification requirements when a clearing member:
d. Determines the existence of a material inadequacy as specified in CFTC Regulation 1.16(d)(2).
C. In conjunction with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17, and 1.18, clearing members must comply with the following requirements:
2. Submit a certified Form 1-FR or FOCUS Report as of the clearing member’s fiscal year-end within the time requirements set forth in CFTC Regulation 1.10. A clearing member must include with its certified Form 1-FR or FOCUS Report, a reconciliation from the certified Form 1-FR or FOCUS Report to the monthly Form 1-FR or FOCUS Report as of the same date or a statement that no differences were noted.
971. SEGREGATION, SECURED AND CLEARED SWAPS CUSTOMER ACCOUNT REQUIREMENTS
A. All clearing members must comply with the requirements set forth in CFTC Regulations 1.20 through 1.30, 1.32, 1.49 and 30.7, and Part 22 of the CFTC Regulations. This includes, but is not limited to, the following:
980. REQUIRED RECORDS AND REPORTS
B. Each clearing member shall maintain an adequate accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets. This includes, but is not limited to, the following:
3. Prevention of a material inadequacy as defined in CFTC Regulation 1.16(d)(2).
C. A clearing member must file any information requested by the Exchange within the time period specified in the request.
FINDINGS: Pursuant to an offer of settlement in which Wedbush Securities Inc. neither admitted nor denied the rule violations upon which the penalty is based, on March 30, 2017, the Clearing House Risk Committee found that Wedbush Securities Inc.. violated CBOT Rules 951., 958.C., 970.A., 970.A.1., 970.A.3.d., 970.C.2., 971.A., 980.B.3. and 980.C.
PENALTY: In accordance with the settlement offer, the Committee imposed a $500,000 fine. In accepting this offer, the Committee agreed to waive $250,000 of the fine based on the firm’s compliance with industry rules, regulations and requirements through the completion of the next risk based examination.
EFFECTIVE DATE: March 31, 2017
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