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SEC charges Wedbush Securities for employee's alleged fraud

Wedbush Securities Inc. is facing SEC charges for allegedly failing to supervise an employee involved in a long-running "pump-and-dump scheme" targeting retail investors, according to an SEC news release.

In "pump-and-dump" schemes, promoters try to boost a company's stock by spreading false and misleading statements in the marketplace. The promoters would then "dump" their shares and stop hyping the stock, which would result in investors losing their money when the price falls.

The SEC found that Timary Delorme benefited from investing client money in microcap stocks connected to a "pump-and-dump" scheme orchestrated by Izak Zirk Engelbrecht, who was previously charged by the commission and criminal authorities in separate actions. Wedbush Securities allegedly ignored red flags suggesting that Delorme was involved in the scheme, including several Financial Industry Regulatory Authority arbitrations and inquiries, the SEC said.

An administrative judge will hear the charges and decide on the matter.

A separate order found that Delorme violated the antifraud provisions of federal securities laws. Without admitting nor denying the findings, Delorme agreed to pay a $50,000 penalty, be subjected to industry and penny stock bars, and cease and desist from future violations.