Wedbush Securities Inc.

Allegations: VIOLATION OF FIDUCIARY DUTIES UNDER ERISA AND ENGAGING IN PROHIBITED TRANSACTIONS Status: Final Summary: THE DEPARTMENT OF LABOR ALLEGED VIOLATION OF FIDUCIARY DUTIES UNDER ERISA AND ENGAGING IN PROHIBITED TRANSACTIONS. THE FIRM AND TRUSTEES AGREED TO SETTLE THE ACTION.

Allegations: EMPLOYEE OF WMS INDUCED A CUSTOMER TO INVEST IN A PRIVATE COMPANY CREATED BY THE EMPLOYEE. WMS COULD NOT HAVE KNOWN ABOUT THIS ACTIVITY SINCE IT WAS NOT DONE THROUGH FACILITIES OF WMS. Status: Final Summary: EMPLOYEE OF WMS INDUCED A CUSTOMER TO INVEST IN A PRIVATE COMPANY CREATED BY THE EMPLOYEE. WMS COULD NOT HAVE KNOWN ABOUT THIS ACTIVITY SINCE IT WAS NOT DONE THROUGH FACILITIES OF WMS. DISPOSITION RESULTED IN A JUDGMENT IN THE AMOUNT OF $69.159.00 OF WHICH A PORTION WAS PAID BY WMS'S FIDELITY BONDING COMPANY ON 2/16/1983.

Allegations: DUE TO AGE OF THIS FILING NO MORE ADDITIONAL INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINED $750.00 Summary: COMPLAINT; #CA-882 FILED 8/28/81,DIST.#2S.DECISION;03/31/82:CENSURED;FINED $750;AND ASSESSED COSTS OF $276.10, J&S.05/07/82: B/G REVIEW.1026/82: B/G DECISION RENDERED;FINDINGS MADE AND 10/26/82: B/G DECISION RENDERED;FINDINGS MADE AND PENALTIES IMPOSED BY THE DBCC ARE AFFIRMED.COMPLAINT #CA-882 FILED AUGUST 28,1981 BY DISTRICT #2 AGAINST RESPONDENTS WEDBUSH,NOBLE,COOKE,INC.,RICHARD A.LANNI AND HARVEY G.LEASON ALLEGING VIOLATIONS OF ARTICLE III,SECTION 1 OF THE RULES OF FAIR PRACTICE IN THAT RESPONDENTS MEMBER AND LANNI FAILED TO MAKE BONA FIDE PUBLIC DISTRIBUTIONS OF STOCK IN THAT THEY ALLOWED RESPONDENT LEASON TO ALLOT 200 SHARES TO THE ACCOUNT OF A MEMBER OF HIS IMMEDIATE FAMILY,IN CONTRAVENTION OF THE BOARD OF GOVERNORS INTERPRETATION WITH RESPECT TO FREE-RIDING AND WITHHOLDING. **DECISION RENDERED MARCH 31,1982 WHEREIN RESPONDENTS ARE CENSURED FINED $750 JOINTLY AND SEVERALLY AND ASSESSED COSTS OF $276.10,JOINTLY AND SEVERALLY** **APRIL 30,1982-APPEALED TO THE NBCC BY RESPONDENT LANNI.** **MAY 7,1982-CALLED FOR REVIEW AS TO RESPONDENTS MEMBER AND LEASON.** **OCTOBER 26,1982-NBCC DECISION RENDERED WHEREIN THE FINDINGS MADE AND SANCTIONS IMPOSED ARE AFFIRMED.IF NO FURTHER ACTION,DECISION IS FINAL NOVEMBER 26,1982.** **DECEMBER 8,1982-APPEALED TO THE SEC** **SEC DECISION RENDERED APRIL 12,1984 WHEREIN THE FINDINGS MADE AND SANCTIONS IMPOSED ARE AFFIRMED.IF NO FURTHER ACTION,DECISION IS FINAL JUNE 12,1984.** **JUNE 12,1984-DECISION IS FINAL.**

Allegations: DUE TO AGE OF THIS FILING NO MORE ADDITIONAL INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINED $15,000.00 Summary: COMPLAINT #CO1910025(DISTRICT #1)FILED JULY 29,1991 AGAINST RESPONDENTS WEDBUSH MORGAN SECURITIES,INC.,RENE ROLAND ST.PIERRE,EDWARD WILLIAM WEDBUSH,PHILIP JOSEPH LOBUE,MARIE ELAIN EATON,RICHARD ANTHONY LANNI,AND MICHAEL HARLAN HUME ALLEGING VIOLATIONS OF ARTICLE III,SECTIONS 1,2 & 27 OF THE RULES OF FAIR PRACTICE IN THAT RESPONDENT ST.PIERRE EXERCISED EFFECTIVE CONTROL OVER THE ACCOUNT OF PUBLIC CUSTOMERS AND RECOMMENDED TO SUCH CUSTOMERS THE PURCHASE AND SALE OF SECURITIES WITHOUT HAVING REASONABLE GROUNDS FOR BELIEVING THAT SUCH RECOMMENDATIONS WERE SUITABLE FOR THE CUSTOMERS IN VIEW OF THE SIZE AND FREQUENCY OF THE RECOMMENDED TRANSACTIONS AND THE CUSTOMERS' FINANCIAL SITUATION AND NEEDS;AND, IN CONNECTION WITH SUCH ACTIVITIES,RESPONDENT MEMBER,ACTING THROUGH RESPONDENTS WEDBUSH,LOBUE,EATON,LANNI AND HUME,FAILED TO ESTABLISH AND IMPLEMENT ADEQUATE WRITTEN SUPERVISORY PROCEDURES TO PROTECT AND PREVENT THE VIOLATIONS AND ALLEGED,AND TO OTHERWISE SUPERVISE RESPONDENT ST.PIERRE. DECISION RENDERED JULY 28,1993 WHEREIN RESPONDENT ST.PIERRE IS CENSURED,FINED $25,000,AND SUSPENDED FROM ASSOCIATION WITH ANY NASD MEMBER IN ANY CAPACITY FOR 30 DAYS;THIS DECISION SHALL SERVE AS A LETTER OF CAUTIONS AS TO RESPONDENTS MEMBER,WEDBUSH, AND LANNI;AND RESPONDENT MEMBER IS REQUIRED TO RESPOND WITH A LETTER WITHIN 30 DAYS SETTING FORTH THE STEPS TO BE TAKEN TO DETECT AND PREVENT SIMILAR VIOLATIONS BY ITS EMPLOYEES IN THE FUTURE;THIS DECISION SHALL SERVE AS A LETTER OF CAUTION AS TO RESPONDENT HUME AND HE IS REQUIRED TO REQUALIFY BY EXAMINATION PRIOR TO ASSUMING ANY SUPERVISORY POSITION WITH ANY NASD MEMBER IN THE FUTURE. IN ADDITION,RESPONDENTS MEMBER,WEDBUSH,LANNI,HUME,AND ST.PIERRE ARE ASSESSED COSTS OF $2,939.30,JOINTLY AND SEVERALLY. THE COMPLAINT WAS DISMISSED AS TO RESPONDENTS LOBUE AND EATON IN THAT THE COMMITTEE DETERMINED THAT IN PERFORMING THEIR COMPLIANCE FUNCTIONS THEY HAD NO LINE AUTHOR***SEE FAQ #1***

Allegations: FINRA RULES 2010, 8210, NASD RULES 2110, 3010: THE FIRM, ACTING THROUGH ITS FORMER CHIEF COMPLIANCE OFFICER, FAILED APPROXIMATELY 37 TIMES, IN CONNECTION WITH APPROXIMATELY 14 FINRA EXAMINATIONS, TO PROVIDE WRITTEN INFORMATION AND RECORDS TIMELY, COMPLETELY OR AT ALL TO PROVIDE REQUESTS FOR INFORMATION MADE BY FINRA. THE FIRM, ACTING THROUGH ITS FORMER CHIEF COMPLIANCE OFFICER, FAILED TO ESTABLISH, IMPLEMENT, AND MAINTAIN A SUPERVISORY SYSTEM, AND TO ESTABLISH, MAINTAIN AND ENFORCE WRITTEN SUPERVISORY PROCEDURES, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH NASD RULE 8210 OR FINRA RULE 8210, AS APPLICABLE. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE IT IS CENSURED AND FINED $75,000.

Allegations: THE FIRM FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYTEM REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE LAWS RULES AND REGULATIONS CONCERNING VARIABLE ANNUITIES AND GENERAL SALES PRACTICE EVEN THOUGH THIS WAS NEVER NOTED AS AN ISSUE IN ANY ANNUAL EXAMINATION CONDUCTED BY THE NYSE, NASD OR FINRA AND THE FIRM DID HAVE WSP'S. THE FIRM FAILED TO MAINTAIN RECORDS IT DID NOT KNOW EXISTED ON A REPS PERSONAL EMAIL ACCOUNT OR WERE MAILED BY A REP IN VIOLATION OF THE FIRMS POLICIES. FINRA ALLEGES A FAILURE TO ADEQUATELY SUPERVISE TWO REPS. THESE ALLEGATIONS INCLUDE VIOLATIONS OF SECTION 17 OF THE SECURITIES EXCHANGE ACT OF 1934, SEC RULES 17A-3, 17A-4, FINRA RULE 2010, NASD RULES 2110, 3010, 3010(A), 3010(B), 3010(C), 3010(D), 3010(E), 3110 Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $360,000 PLUS JOINT AND SEVERAL LIABILITY FOR $15,000. Summary: THE FIRM SETTLED THE CASE WITHOUT ADMITTING OR DENYING THE ALLEGATIONS ON SEPTEMBER 10, 2012 FOR A FINE OF $360,000 PLUS $15,000 JOINT AND SEVERAL WITH TWO EMPLOYEES.

Allegations: FAILURE TO OVERSEE AND SUPERVISE THE TRADING ACTIVITIES OF ITS PRESIDENT Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $1,000,000 (($900,000 OF WHICH IS PAYABLE JOINTLY AND SEVERALLY) AND REQUIRED TO COMPLETE THE UNDERTAKINGS AS STATED IN THE OFFER OF SETTLEMENT, INCLUDING TO HIRE AN OUTSIDE AUDITING FIRM, NOT UNACCEPTABLE TO NYSE REGULATION STAFF, TO ASSIST ITS INTERNAL AUDIT DEPARTMENT IN CONDUCTING INTERNAL AUDITS. WEDBUSH SECURITIES SHALL (I) COMPLETE A COMPREHENSIVE REVIEW OF THE FIRM'S COMPLIANCE PROGRAM; (II) IMPLEMENT CHANGES AND ENHANCEMENTS; AND (III) WORK TOGETHER WITH AN INDEPENDENT CONSULTANT CONCERNING THE AREAS TO BE REVIEWED. WEDBUSH SECURITIES SHALL ALSO HIRE AN ADDITIONAL PERMANENT, FULL-TIME, SENIOR EMPLOYEE WITH RELEVANT REGULATORY EXPERIENCE TO WORK IN THESE AREAS. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WEDBUSH SECURITIES INC. ("WEDBUSH" OR THE "FIRM") CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS

Allegations: WEDBUSH SECURITIES INC. (THE FIRM, WEDB, OR RESPONDENT) WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT KNEW AND SYSTEMICALLY FAILED TO OVERSEE AND SUPERVISE THE TRADING ACTIVITIES OF ITS PRINCIPAL, EDWARD W. WEDBUSH ("MR. WEDBUSH"). THE COMPLAINT ALLEGES THAT IN ADDITION TO SERVING AS THE PRESIDENT OF WEDB AND THE CHAIRMAN OF WEDB'S PARENT COMPANY, WEDBUSH, INC., MR. WEDBUSH SPENT SEVERAL HOURS EACH TRADING DAY ACTIVELY MANAGING AND TRADING IN MORE THAN 70 ACCOUNTS (COLLECTIVELY, THE "EW CONTROLLED ACCOUNTS"). DESPITE MR. WEDBUSH'S ACTIVE TRADING IN DOZENS OF CUSTOMER, PERSONAL, AND PROPRIETARY ACCOUNTS, RESPONDENTS FAILED TO IMPLEMENT ANY PROCESS TO MONITOR OR SUPERVISE MR. WEDBUSH'S ORDER ENTRY, TRADE EXECUTIONS, OR TRADE ALLOCATIONS IN THE EW CONTROLLED ACCOUNTS, INCLUDING FOR POTENTIAL CONFLICTS OF INTEREST AND POTENTIAL MANIPULATIVE ACTIVITY. THE ABSENCE OF MONITORING OR SUPERVISION OF HIS TRADING ACTIVITIES ALLOWED MR. WEDBUSH TO HANDLE THE EW CONTROLLED ACCOUNTS IN AN UNFETTERED MANNER THAT WAS NOT PERMITTED FOR OTHER TRADERS AT THE FIRM. FOR EXAMPLE, MR. WEDBUSH REGULARLY INSTRUCTED A FIRM EMPLOYEE TO ENTER ORDERS UNDER A GENERAL ACCOUNT, WAITING UNTIL THE END OF THE TRADING DAY TO ALLOCATE EXECUTED TRADES AMONG THE VARIOUS EW CONTROLLED ACCOUNTS (I.E., TO CUSTOMERS, PERSONAL ACCOUNTS, OR PROPRIETARY ACCOUNTS). MR. WEDBUSH'S POST-EXECUTION ALLOCATIONS WERE DETERMINED BASED ENTIRELY ON HIS OWN DISCRETION, AND THE FIRM HAD NO PROCESS TO ENSURE THAT TRADE ALLOCATIONS AMONG THE EW CONTROLLED ACCOUNTS WERE NOT BEING MADE TO STEER PROFITABLE TRADES TO PREFERRED EW CONTROLLED ACCOUNTS OR FOR OTHER IMPROPER PURPOSES. MR. WEDBUSH'S ORDERS FOR THE EW CONTROLLED ACCOUNTS WERE MADE AND EXECUTED ON A SEPARATE TRADING PLATFORM, NOT USED BY OTHER WEDB TRADERS. AND NO OTHER WEDBUSH EMPLOYEES, BESIDES MR. WEDBUSH, WERE ALLOWED TO MAKE POST-EXECUTION ALLOCATIONS. THE COMPLAINT ALSO ALLEGES THAT IN MANAGING THE EW CONTROLLED ACCOUNTS, MR. WEDBUSH: (I) HANDLED VARIOUS CUSTOMER ACCOUNTS TOGETHER WITH PROPRIETARY AND PERSONAL ACCOUNTS, IN THE SAME SECURITIES AT THE SAME TIME; (II) "BUNCHED" ORDERS FOR THE EW CONTROLLED ACCOUNTS; (III) FAILED TO RECORD ACCOUNT NAMES OR DESIGNATIONS PRIOR TO TRADE EXECUTION AND THEREBY WEDB WILLFULLY VIOLATED SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AND RULES 17A-3 AND 17A-4 THEREUNDER; AND (IV) WAITED UNTIL AFTER TRADE EXECUTION TO ALLOCATE TRADES AMONG THE EW CONTROLLED ACCOUNTS. THE COMPLAINT FURTHER ALLEGES THAT WEDB AND MR. WEDBUSH FAILED TO MARK PROPRIETARY ORDERS WITH THE APPROPRIATE DESIGNATOR. THE FIRM, HOWEVER, TOOK NO MEANINGFUL ACTION TO ADDRESS A CO-CCO'S COMPLIANCE CONCERNS ABOUT THE LACK OF SUPERVISION OF MR. WEDBUSH'S TRADING WITH THE AUDIT COMMITTEE OF WEDB'S BOARD OF DIRECTORS. WEDB'S SUPERVISORY SYSTEMS AND PROCEDURES WERE INADEQUATE AND WERE NOT REASONABLY DESIGNED FOR ITS BUSINESS AS IT RELATED TO THE EW CONTROLLED ACCOUNTS. THE FIRM FAILED TO ESTABLISH, IMPLEMENT, AND ENFORCE ADEQUATE SUPERVISORY SYSTEMS AND PROCEDURES, INCLUDING WSPS, REASONABLY DESIGNED TO SUPERVISE MR. WEDBUSH AND THE EW CONTROLLED ACCOUNTS TO ACHIEVE COMPLIANCE WITH THE FEDERAL SECURITIES LAWS AND EXCHANGE RULES, RESPONDENTS VIOLATED NYSE ARCA RULES. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $1,000,000 (($900,000 OF WHICH IS PAYABLE JOINTLY AND SEVERALLY) AND REQUIRED TO COMPLETE THE UNDERTAKINGS AS STATED IN THE OFFER OF SETTLEMENT, INCLUDING TO HIRE AN OUTSIDE AUDITING FIRM, NOT UNACCEPTABLE TO NYSE REGULATION STAFF, TO ASSIST ITS INTERNAL AUDIT DEPARTMENT IN CONDUCTING INTERNAL AUDITS. WEDBUSH SECURITIES SHALL (I) COMPLETE A COMPREHENSIVE REVIEW OF THE FIRM'S COMPLIANCE PROGRAM; (II) IMPLEMENT CHANGES AND ENHANCEMENTS; AND (III) WORK TOGETHER WITH AN INDEPENDENT CONSULTANT CONCERNING THE AREAS TO BE REVIEWED. WEDBUSH SECURITIES SHALL ALSO HIRE AN ADDITIONAL PERMANENT, FULL-TIME, SENIOR EMPLOYEE WITH RELEVANT REGULATORY EXPERIENCE TO WORK IN THESE AREAS. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WEDBUSH SECURITIES INC. ("WEDBUSH" OR THE "FIRM") CONSENTED TO THE SANCTIONS THE FIRM WAS CENSURED, FINED $1,000,000 (($900,000 OF WHICH IS PAYABLE JOINTLY AND SEVERALLY) AND REQUIRED TO COMPLETE THE UNDERTAKINGS AS STATED IN THE OFFER OF SETTLEMENT, INCLUDING TO HIRE AN OUTSIDE AUDITING FIRM, NOT UNACCEPTABLE TO NYSE REGULATION STAFF, TO ASSIST ITS INTERNAL AUDIT DEPARTMENT IN CONDUCTING INTERNAL AUDITS. WEDBUSH SECURITIES SHALL (I) COMPLETE A COMPREHENSIVE REVIEW OF THE FIRM'S COMPLIANCE PROGRAM; (II) IMPLEMENT CHANGES AND ENHANCEMENTS; AND (III) WORK TOGETHER WITH AN INDEPENDENT CONSULTANT CONCERNING THE AREAS TO BE REVIEWED. WEDBUSH SECURITIES SHALL ALSO HIRE AN ADDITIONAL PERMANENT, FULL-TIME, SENIOR EMPLOYEE WITH RELEVANT REGULATORY EXPERIENCE TO WORK IN THESE AREAS.

Allegations: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,WMS CONSENTED TO THE ENTRY OF FINDINGS THAT IT FAILED WITHIN 90 SECONDS AFTER EXECUTION,TO TRANSMIT THROUGH ACT LAST SALE REPORTS OF TRANSACTIONS AND FAILED TO DESIGNATE AS".T" REPORTS OF TRANSACTIONS EXECUTED OUTSIDE NORMAL MARKET HOURS AND INCORRECTLY DESIGNATED AS".T" LAST SALE REPORTS OF TRANSACTIONS IN NNM SECURITIES EXECUTED DURING NORMAL MARKET HOURS. Status: Final Sanction Detail: A FINE OF $5,000.00

Allegations: WITHOUT ADMITTING OF DENYING ALLEGATIONS THAT IT FAILED TO TRANSMIT 78 TRANSACTION REPORTS IN OTC SECURITIES THROUGH ACT WITHIN 90 SECONDS AFTER EXECUTION BETWEEN SEPTEMBER 1,2002 AND DECEMBER 31,2002, WEDBUSH MORGAN SECURITIES CONSENTED TO A CENSURE AND A FINE OF $7500. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WEDBUSH MORGAN SECURITIES INC. CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $7500.

Allegations: DURING THE TIME PERIOD FROM JANUARY 1, 2003 THRU AUGUST 3, 2005, THE FIRM ALLEGEDLY FILED 27 FORM U-5S LATE. A FEW DEPARTMENT MANAGERS MAY HAVE NOT PROMPTLY ADVISED THE FIRM'S BUSINESS CONDUCT DEPARTMENT WHICH WAS RESPONSIBLE FOR FILING THE U-5. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $18,000.

Allegations: THE NASD ALLEGED THAT THE FIRM EFFECTED LATE TRADING IN MUTUAL FUNDS AFTER MARKET CLOSE. DESPITE THE TIME WHEN THE ORDERS WERE RECEIVED, THE ORDERS WERE EXECUTED AND PRICED AT THE NET ASSET VALUE AS OF THE CLOSE OF TRADING ON THE SAME DAY THEY WERE RECEIVED BY THE FIRM. ALSO, THE NASD ALLEGED THAT THE FIRM'S SUPERVISORY SYSTEMS AND WRITTEN PROCEDURES WERE INEFFECTIVE TO PREVENT LATE MUTUAL FUND TRADING, AND THAT THE FIRM DID NOT KEEP SUFFICIENT RECORDS THAT REFLECTED THE TIME OF RECEIPT OF ORDERS TO PURCHASE OR SELL MUTUAL FUNDS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $150,000. AND IS REQUIRED TO REVIEW AND UPDATE SUPERVISORY PROCEDURES REGARDING LATE TRADING AND RECORD KEEPING. Summary: THE FIRM HAS STRENGTHENED ITS SUPERVISORY PROCEDURES AND RECORD-KEEPING REQUIREMENTS FOR MUTUAL FUND.

Allegations: THE NYSE ALLEGED THAT THE FIRM IS SUBJECT TO DISCIPLINE PURSUANT TO NYSE RULE 476(A) FOR THE FOLLOWING REASONS: 1) SUBMITTED INACCURATE TRADING INFORMATION THROUGH THE SUBMISSION OF ELECTRONIC BLUE SHEETS, WHICH LED TO VIOLATION OF NYSE RULE 401, 2) DID NOT ESTABLISH AND MAINTAIN APPROPRIATE SYSTEMS AND PROCEDURES FOR THE SUPERVISION AND CONTROL OF AREAS RESPONSIBLE FOR COMPLYING WITH ELECTRONIC BLUE SHEETS REPORTING REQUIREMENTS AND FAILED TO ESTABLISH A SEPARATE SYSTEM TO FOLLOW-UP AND REVIEW TO ENSURE COMPLIANCE WITH NYSE RULES RELATING TO THE PREPARATION AND SUBMISSION OF ELECTRONIC BLUE SHEETS, 3) MADE ONE OR MORE MATERIAL MISSTATEMENTS TO THE NYSE IN RESPONSE TO ONE OR MORE REQURESTS FOR INFORMATION BY THE NYSE, 4) DID NOT COOPERATE WITH AN NYSE INVESTIGATION SATISFACTORILY. Status: Final Sanction Detail: $200,000 FINE PAID MAY 8, 2008 AFTER BEING REDUCED IN THE APPEAL FROM THE ORIGINAL $300,000 Summary: A HEARING ON THIS MATTER WAS COMPLETED IN NOV-2006. A VERDICT WAS ISSUED APRIL 2007. AN APPEAL WAS FILED AND A DECISION ON THE APPEAL RECEIVED MARCH 2008 REDUCING THE FINE AND SCOPE OF THE UNDERTAKING. THE FINE WAS PAID MAY 8, 2008 AND UNDERTAKING IS IN PROGRESS.

Allegations: WEDBUSH MORGAN SECURITIES STATES THAT THE PARIS FACILITY IS NOT A BRANCH OFFICE OF WEDBUSH MORGAN SECURITIES BUT IS CORRESPONDENT FIRM, HAW FINANCE NETWORK. NYSE ALLEGED THE FIRM INFRINGED EXCHANGE RULES 342(A) AND (B) BY NOT HAVING PROCEDURES OF SUPERVISION WITH RESPECT TO THE ACTIVITIES OF THE PARIS OFFICE; INFRINGED EXCHANGE RULE 342(C) BY NOT OBTAINING THE CONSENT TO ESTABLISH THE OFFICES OTHER THAN THE MAIN OFFICE BY THE EXCHANGE; INFRINGED EXCHANGE RULE 405 BY NOT USING DUE DILIGENCE TO SUPERVISE ACCOUNTS HANDLED BY REGISTERED REPRESENTATIVES IN THE PARIS OFFICE; INFRINGED RULES 17-4(B)(4) AND 17A-4(F) UNDER THE EXCHANGE ACT AND EXCHANGE RULES 440 AND 472(A)(1) BY NOT REVIEWING WRITTEN OR ELECTRONIC COMMUNICATIONS; INFRINGED RULE 17A-3(6) UNDER THE EXCHANGE ACT AND EXCHANGE RULE 440 BY NOT MAINTAINING ORDER TICKETS AND EXECUTION REPORTS OF THE PARIS OFFICE; INFRINGED EXCHANGE RULES 342(D) AND 345(A) BY NOT HAVING ONE OR MORE QUALIFIED PERSONS ACCEPTABLE TO THE EXCHANGE IN CHARGE OF BRANCH OFFICES; AND/OR PERFORM REGULARLY THE DUTIES CUSTOMARILY PERFORMED BY A REGISTERED REPRESENTATIVE AND A DIRECT SUPERVISOR;**CONTINUED AT 13C** Status: Final Sanction Detail: $100,000 FINE AND AN UNDERTAKING TO EVALUATE THE REGULATORY AND COMPLIANCE RESOURCES OF THE FIRM Summary: **CONTINUED FROM #7** INFRINGED EXCHANGE RULE 345A(A) BY PERMITTING ONE OR MORE REGISTERED REPRESENTATIVES TO CONTINUE TO PERFORM DUTIES AS A REGISTERED PERSON WITHOUT MEETING CONTINUING EDUCATION REQUIREMENTS; INFRINGED EXCHANGE RULE 407(B) BY FAILING TO RECEIVE AND REVIEW MONTHLY ACCOUNT STATEMENTS AND CONFIRMATION OF ACCOUNTS HELD AT OTHER FIRMS BY REGISTERED REPRESENTATIVES; INFRINGED EXCHANGE RULE 445 BY NOT IMPLEMENTING POLICIES AND PROCEDURES TO DETECT REPORTING OF TRANSACTIONS REQUIRED UNDER 31 U.S.C. 5318(G) AND DID NOT IMPLEMENT POLICIES AND PROCEDURES TO ACHIEVE COMPLIANCE WITH THE BANK SECRECY ACT; INFRINGED RULE 15C-3-3(G) UNDER THE EXCHANGE ACT BY MAKING WITHDRAWALS FROM ITS SPECIAL RESERVE ACCOUNT WHEN AT THE TIME OF THE WITHDRAWALS THE AMOUNT REMAINING IN THE RESERVE ACCOUNT WAS LESS THAN THE AMOUNT REQUIRED TO BE ON DEPOSIT PURSUANT TO RULE 15C3-3(E) UNDER THE EXCHANGE ACT.

Allegations: WEDBUSH MORGAN SECURITIES HAS BEEN CHARGED WITH VIOLATING ARTICLE V, SECTION 4(E) OF THE EXCHANGE CONSTITUTION, ALONG WITH EXCHANGE RULES 31 AND 320 BY MAKING MATERIAL MISSTATEMENTS TO THE EXCHANGE, FAILING TO RESPOND TO EXCHANGE REQUESTS IN A TIMELY FASHION, AND FAILING TO SUPERVISE ITS CROP IN DEALINGS WITH THE EXCHANGE. **04/03/2009**STIPULATION OF FACTS AND CONSENT TO PENALTY FILLED BY NYSE REGULATION'S DIVISION OF ENFORCEMENT AND PENDING CONSENTED TO FINDINGS:FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS, WEDBUSH MORGAN SECURITIES, INC. STIPULATED THAT DURING THE PERIOD OF JUNE 2002 THROUGH FEBRUARY 2003, IT 1.VIOLATED ARTICLE V, SECTION 4(E)OF THE AMERICAN STOCK EXCHANGE CONSTITUTION, IN THAT THE FIRM THROUGH ONE OF ITS FORMER EMPLOYEES MADE MISSTATEMENTS TO THE AMERICAN STOCK EXCHANGE BY REPRESENTING THAT IT HAD TAKEN CORRECTIVE ACTION IN RESPONSE TO EXAMINATION FINDINGS WHEN IN FACT WEDBUSH HAD NOT TAKEN SUCH CORRECTIVE ACTION.2. VIOLATED AMERICAN STOCK EXCHANGE RULE 31, IN THAT WEDBUSH THROUGH ONE OF ITS FORMER EMPLOYEES FAILED TO COOPERATE AND TIMELY COMPLY WITH SPECIFIC DEADLINES SET BY THE AMERICAN STOCK EXCHANGE TO PROVIDE INFORMATION RESPONSIVE TO EXCHANGE REQUESTS MADE IN CONNECTION WITH AN ONGOING EXCHANGE INVESTIGATION.3. VIOLATED AMERICAN STOCK EXCHANGE RULE 320(C) IN THAT IT FAILED TO FAILED TO IMPLEMENT ADEQUATE CONTROLS, INCLUDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, TO VERIFY THAT ALL NECESSARY STEPS WERE TAKEN BY ITS COMPLIANCE REGISTERED OPTIONS PRINCIPAL, WHO WAS ALSO THE FIRM'S COMPLIANCE DIRECTOR, TO COMPLY ACCURATELY AND WITHIN THE TIME FRAMES REQUIRED TO AMERICAN STOCK EXCHANGE REQUESTS FOR INFORMATION AND/OR DOCUMENTATION MADE IN CONNECTION WITH AN ONGOING AMERICAN STOCK EXCHANGE INVESTIGATION.STIPULATED SANCTION:CENSURE AND A FINE IN THE AMOUNT OF $15,000. Status: Final Sanction Detail: **4/8/09 (AMENDED DECISION 4/14/09)** DECISION NO. 09-AMEX-05 ISSUED BY NYSE AMEX HEARING BOARD DECISION:VIOLATED ARTICLE V, SECTION 4(E) OF AMEX CONSTITUTION IN THAT ITS THEN COMPLIANCE REGISTERED OPTIONS PRINCIPAL ("CROP") MADE MISSTATEMENTS TO AMEX BY REPRESENTING THAT IT HAD TAKEN CORRECTIVE ACTION IN RESPONSE TO EXAMINATION FINDINGS WHEN IT HAD NOT; VIOLATED AMEX RULE 31 IN THAT ITS THEN CROP FAILED TO COOPERATE AND TIMELY COMPLY WITH SPECIFIC DEADLINES SET BY AMEX TO PROVIDE INFORMATION RESPONSIVE TO AMEX REQUESTS MADE IN CONNECTION WITH ONGOING AMEX INVESTIGATION; VIOLATED AMEX RULE 320(C) BY FAILING TO IMPLEMENT ADEQUATE CONTROLS, INCLUDING A SEPARATE SYSTEM OF FOLLOW UP AND REVIEW, TO VERIFY THAT ALL NECESSARY STEPS WERE TAKEN BY ITS THEN CROP, WHO WAS ALSO THE FIRM'S COMPLIANCE DIRECTOR, TO COMPLY ACCURATELY AND WITHIN THE TIME FRAMES REQUIRED TO AMEX REQUESTS FOR INFORMATION AND/OR DOCUMENTATION MADE IN CONNECTION WITH AN ONGOING AMEX INVESTIGATION - CONSENT TO CENSURE AND $15,000 FINE.

Allegations: THE FIRM FAILED TO TIMELY REPORT ROE'S FOR FIVE MPID'S ON 19 BUSINESS DAYS FROM SEPTEMBER 1, 2006 THROUGH AUGUST 31, 2007. THE LATE ROE'S REPRESENTED ABOUT TWO PERCENT OF ALL ROE'S AND A VIOLATION OF NASD RULE 6955(A). Status: Final Sanction Detail: CENSURE AND FINE IN THE AMOUNT OF $25,000

Allegations: NASD RULES 2110, 2111(A), 2320 - WEDBUSH SECURITIES, INC. FAILED TO EXECUTE ORDERS FULLY AND PROMPTLY. IN TRANSACTIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINES $10,000.00. THE FIRM MADE RESTITUTION PAYMENTS TOTALLING %581.38 Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND FINDINGS.

Allegations: **01/27/2010**MINOR RULE PLAN FINE ISSUED. RULE VIOLATION: VIOLATION OF NYSE ARCA EQUITIES RULE 10.2(D) FOR THE FAILURE OF WEDBUSH MORGAN SECURITIES INC. TO PROVIDE TIMELY RESPONSES TO NYSE REGULATION'S LETTERS REQUESTING DOCUMENTS AND INFORMATION WHICH IMPEDED AND DELAYED FOUR REGULATORY INVESTIGATIONS.FINE IMPOSED: $3,500.00 Status: Final Sanction Detail: THE FIRM AGREED TO PAY A FINE OF $3,500.00 AFTER ORIGINALLY CONTESTING THE IMPOSITION OF THE FINE BUT DETERMINING IT DID NOT MAKE FINANCIAL SENSE TO CONTINUE WITH THE PROCESS. Summary: THE FIRM AGREED TO PAY A FINE OF $3,500.00 ON AUGUST 16, 2010 AFTER ORIGINALLY CONTESTING THE IMPOSITION OF THE FINE BUT DETERMINING IT DID NOT MAKE FINANCIAL SENSE TO CONTINUE WITH THE PROCESS.

Allegations: FROM 1/1/2009-3/31/2009 THE FIRM FAILED TO REPORT THE CORRECT TIME ON 142 REPORTS TO "RTRS" THE FIRM ALSO FAILED TO REPORT 141 TRADES WITHIN THE REQUIRED 15 MINUTES. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $15,000 FOR 142 TRADES REPORTED WITH AN INCORRECT TIME AND 141 TRADES REPORTED AFTER THE REQUIRED 15 MINUTES Summary: THE FIRM WAS CENSURED AND FINED $15,000 FOR 142 TRADES REPORTED WITH AN INCORRECT TIME AND 141 TRADES REPORTED AFTER THE REQUIRED 15 MINUTES

Allegations: OATS NON-REPORTING,LATE REPORTING AND SUPERVISION NASD RULE 6955/FINRA RULE 7450, NASD RULE 2110 AND 3010/FINRA RULE 2010, NASD RULE 1021 AND 1031 FAILURE TO REGISTER AN INDIVIDUAL AS A GENERAL SECURITIES PRINCIPAL. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $750,000 AND REQUIRED TO RETAIN WITHIN 30 DAYS OF THE ORDER ACCEPTING THE OFFER OF SETTLEMENT, AN INDEPENDENT CONSULTANT (IC) TO CONDUCT A COMPREHENSIVE REVIEW OF THE FIRM'S POLICIES, SYSTEMS, CONTROLS, PROCEDURES (WRITTEN AND OTHERWISE), AND TRAINING RELATED TO OATS REPORTING AND THE FIRM'S SUPERVISION OF OATS REPORTING. AT THE CONCLUSION OF THE REVIEW WHICH SHALL BE NO MORE THAN 120 DAYS AFTER THE DATE OF THE ORDER, THE IC SHALL SUBMIT AN INITIAL REPORT TO THE FIRM AND FINRA WHICH SHALL INCLUDE RECOMMENDATIONS RELATING TO OATS REPORTING AND THE FIRM'S SUPERVISION OF OATS REPORTING. WITHIN 60 DAYS AFTER DELIVERY OF THE INITIAL REPORT, THE FIRM SHALL ADOPT AND IMPLEMENT THE IC'S RECOMMENDATIONS OR PROPOSE ALTERNATIVE PROCEDURES. WITHIN 30 DAYS, THE IC SHALL EVALUATE THE ALTERNATIVE PROCEDURES AND PROVIDE THE FIRM AND FINRA WITH A WRITTEN DECISION REFLECTING HIS/HER DETERMINATION. THE FIRM WILL ABIDE BY THE IC'S ULTIMATE DETERMINATION, ADOPT AND IMPLEMENT ALL RECOMMENDATIONS. WITHIN 30 DAYS, THE FIRM SHALL PROVIDE FINRA WITH A WRITTEN IMPLEMENTATION REPORT, CERTIFIED BY A FIRM OFFICER. THE IC SHALL CONDUCT A FOLLOW-UP REVIEW AND SUBMIT A WRITTEN FINAL REPORT NO LATER THAN ONE YEAR FROM THE DATE OF THE ORDER. WITHIN 30 DAYS OF RECEIPT OF THE IC'S FINAL REPORT, THE FIRM SHALL ADOPT AND IMPLEMENT THE FINAL REPORT'S RECOMMENDATIONS. Summary: THE FIRM SUBMITTED AN OFFER OF SETTLEMENT WITHOUT ADMITTING OR DENYING THE ALLEAGTIONS ON MAY 2, 2013. THE OFFER WAS ACCEPTED BY THE HEARING BOARD AND THE FINRA NAC ON JUNE 25, 2013.

Allegations: THE EXERCISE OF OPTIONS AFTER THE 5:30 P.M. EST CUT-OFF TIME DUE TO A NEWS RELEASE AFTER THE CUT-OFF TIME. FAILURE TO HAVE ADEQUATE WRITTEN SUPERVISORY PROCEDURES TO ENSURE AN EXERCISE DOES NOT TAKE PLACE AFTER THE CUT-OFF TIME ABSENT AN APPLICABLE EXCEPTION. Status: Final Sanction Detail: $75,000 FINE AND $73,326 IN RESTITUTION AND AN UNDERTAKING TO MODIFY THE FIRMS WRITTEN SUPERVISORY PROCEDURES.

Allegations: **11/30/12** OFFER OF SETTLEMENT AND CONSENT FILED BY FINRA MARKET REGULATION, LEGAL SECTION AND PENDING. FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TO HEREIN, WEDBUSH SECURITIES, INC. STIPULATED THAT FROM ON OR ABOUT JULY 30, 2009 TO ON OR ABOUT MAY 21, 2010 IT: 1.VIOLATED NYSE ARCA OPTIONS RULE 6.67(B) BY FAILING TO COMPLY WITH THE ORDER FORMAT REQUIREMENTS OF THE EXCHANGE BY SUBMITTING ORDERS WITH INCORRECT INFORMATION AS TO WHETHER SUCH TRANSACTION WAS AN OPENING OR CLOSING TRANSACTION. 2.VIOLATED NYSE ARCA OPTIONS RULE 6.14 BY MAKING ADJUSTMENTS TO POSITIONS AT THE OPTIONS CLEARING CORPORATION THAT WERE NOT FOR THE PURPOSE OF CORRECTING A BONA FIDE ERROR. 3. VIOLATED NYSE ARCA OPTIONS RULE 11.18 BY FAILING TO ESTABLISH AND MAINTAIN A SYSTEM TO SUPERVISE THE ACTIVITIES OF ITS ASSOCIATED PERSONS AND THE OPERATION OF ITS BUSINESS REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE ARCA OPTIONS RULE 6.14. STIPULATED SANCTION: 1. CENSURE; AND 2. FINE IN THE AMOUNT OF $25,000. Status: Final Sanction Detail: NYSE ARCA HEARING BOARD DECISION ISSUED JANUARY 2, 2013 WHEREIN IN ACCORDANCE WITH THE OFFER OF SETTLEMENT AND CONSENT, THE FIRM IS CENSURED AND FINED $25,000. Summary: ON NOVEMEBR 25, 2012 WEDBUSH SIGNED AN OFFER OF SETTLEMENT WHCIH WAS SIGNED BY COUNSEL FOR FINRA MARKET REGULATION ON NOVEMBER 30, 2013. THE HEARING BOARD ACCEPTED THE OFFER OF SETTLEMENT AND ISSUED THE DECISION ON JANUARY 2, 2013 OF A CENSURE AND FINE OF $25,000.

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT FAILED TO PROVIDE TRADE DATA REQUESTED BY THE SEC AND FINRA, COMMONLY KNOWN AS "BLUE SHEETS," FOR MORE THAN 160,000 TRADES THAT IT EXECUTED FOR CORRESPONDENT FIRMS, AND FAILED TO PROPERLY SUBMIT BLUE SHEETS REQUESTED BY THE SEC AND FINRA FOR MORE THAN 5.6 MILLION TRADES. THE FIRM KNEW OR SHOULD HAVE KNOWN THAT ITS BLUE SHEET SUBMISSIONS TO THE SEC WERE INACCURATE AND INCOMPLETE. THE COMPLAINT ALLEGES THAT THESE FAILURES WERE DUE IN PART TO THE FIRM'S LACK OF AN ADEQUATE AUDIT SYSTEM PROVIDING FOR ACCOUNTABILITY OF ITS BLUE SHEET SUBMISSIONS AND ITS LACK OF A SUPERVISORY SYSTEM AND PROCEDURES FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONS AND WITH APPLICABLE FINRA AND NASD RULES FOR ELECTRONIC BLUE SHEET REPORTING REQUIREMENTS. THE FIRM KNEW OR SHOULD HAVE KNOWN THAT ITS AUDIT SYSTEM DID NOT PROVIDE FOR ACCOUNTABILITY OF ITS BLUE SHEET SUBMISSIONS. AS A RESULT, THE FIRM WILLFULLY VIOLATED SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES 17A-4(F)(3)(V), 17A-4(J) AND 17A-25 THEREUNDER, AND FINRA RULE 2010. Status: Final Sanction Detail: THE FIRM WAS FINED $1,000,000 AND ORDERED TO PAY COSTS OF $9,085.21. Summary: EXTENDED HEARING PANEL DECISION RENDERED AUGUST 27, 2015 WHEREIN THE FIRM WAS FINED IN THE AGGREGATE $1,000,000 AND ORDERED TO PAY COSTS IN THE AMOUNT OF $9,085.21. ON SEPTEMBER 21, 2015, THE FIRM APPEALED THE DECISION TO THE NAC. ON MAY 18, 2016, THE FIRM WITHDREW ITS APPEAL OF THE EXTENDED HEARING PANEL DECISION. ACCORDINGLY, THE MATTER IS NOW FINAL.

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT FAILED TO HAVE A SUPERVISORY SYSTEM REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE SECURITIES LAWS AND FINRA RULES, AND NASD RULE 3010(B), BY FAILING TO ESTABLISH, MAINTAIN AND ENFORCE WRITTEN PROCEDURES TO SUPERVISE THE TYPES OF BUSINESS IN WHICH IT ENGAGED. THE COMPLAINT ALLEGES THAT DESPITE NUMEROUS RED FLAGS THAT SHOULD HAVE ALERTED THE FIRM TO THE TYPES OF POTENTIAL MANIPULATION BY ITS MARKET ACCESS CUSTOMERS, THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) CONTINUED TO LACK REASONABLE OR ANY PROCEDURES AND REVIEWS FOR VARIOUS TYPES OF PRICE MANIPULATION, INCLUDING LAYERING, SPOOFING, PRE-ARRANGED TRADING, AUTO-EXECUTION, EXCESSIVE ORDER ENTRY AND MARKING-THE-CLOSE, AND CONTAINED FUNDAMENTAL FLAWS WITH RESPECT TO ESTABLISHED REVIEWS. THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE WSPS REASONABLY DESIGNED TO SUPERVISE THE TYPES OF BUSINESS IN WHICH IT WAS ENGAGED AND TO SUPERVISE THE ACTIVITIES OF REGISTERED REPRESENTATIVES, REGISTERED PRINCIPALS AND OTHER ASSOCIATED PERSONS THAT WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND FINRA RULES, INCLUDING SEC RULE 15C3-5. THE COMPLAINT ALSO ALLEGES THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE ADEQUATE ANTI-MONEY LAUNDERING (AML) POLICIES AND PROCEDURES AND FAILED TO REASONABLY MONITOR, DETECT, AND CAUSE THE REPORTING OF POTENTIALLY SUSPICIOUS ACTIVITY BY ITS MARKET ACCESS CUSTOMERS. THE FIRM FAILED TO DEVELOP AND IMPLEMENT AML POLICIES, PROCEDURES, AND INTERNAL CONTROLS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE BANK SECRECY ACT AND THE IMPLEMENTING REGULATIONS PROMULGATED THEREUNDER. ALTHOUGH THE FIRM HAD AML POLICIES AND PROCEDURES IN PLACE, THEY WERE NOT TAILORED TO ITS MARKET ACCESS BUSINESS AND THEREFORE COULD NOT REASONABLY BE EXPECTED TO DETECT AND CAUSE THE REPORTING OF SUSPICIOUS TRANSACTIONS. THE FIRM MISSED OR OTHERWISE FAILED TO INVESTIGATE NUMEROUS RED FLAGS OF SUSPICIOUS ACTIVITY RELATED TO ITS MARKET ACCESS BUSINESS AND CLIENTS. THIS FAILURE WAS AT LEAST PARTLY THE RESULT OF THE FIRM'S FAILURE TO ADOPT CLEAR LINES OF RESPONSIBILITY FOR AML COMPLIANCE REGARDING THE MARKET ACCESS BUSINESS. THE COMPLAINT FURTHER ALLEGES THAT THE FIRM FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNED TO SYSTEMATICALLY MANAGE THE REGULATORY AND OTHER RISKS OF PROVIDING MARKET ACCESS. THE FIRM FAILED TO APPROPRIATELY CONTROL THE RISKS ASSOCIATED WITH PROVIDING ITS CUSTOMERS WITH MARKET ACCESS SO AS NOT TO JEOPARDIZE THE FIRM'S AND OTHER MARKET PARTICIPANTS' FINANCIAL CONDITION AND THE INTEGRITY OF THE TRADING ON THE SECURITIES MARKETS. THE FIRM ALSO FAILED TO ENSURE THAT IT HAD ADEQUATE RISK MANAGEMENT CONTROLS TO PREVENT THE ENTRY OF ERRONEOUS ORDERS, BY REJECTING ORDERS THAT EXCEED APPROPRIATE PRICE OR SIZE PARAMETERS, ON AN ORDER-BY-ORDER BASIS OR OVER A SHORT PERIOD OF TIME. THE FIRM FAILED TO REASONABLY ALLOCATE, BY WRITTEN CONTRACT, AFTER A THOROUGH DUE DILIGENCE REVIEW, CONTROL OVER SPECIFIC REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES TO A BROKER-DEALER CUSTOMER. THE FIRM FAILED TO ADEQUATELY REVIEW THE PERFORMANCE OF BROKER-DEALERS TO WHOM IT HAS ALLOCATED CERTAIN REGULATORY RESPONSIBILITIES. THE FIRM KNOWINGLY AND DELIBERATELY CREATED A DISINCENTIVE FOR ITS EMPLOYEES TO CONDUCT RIGOROUS AND EFFECTIVE MONITORING AND CURTAIL POTENTIAL VIOLATIVE ACTIVITY AND PROFITED HANDSOMELY FROM ITS ABJECT FAILURE TO REASONABLY MONITOR AND DETECT THOUSANDS OF INSTANCES OF POTENTIAL MANIPULATIVE ACTIVITY BY THE SAME RECIDIVIST CUSTOMERS, DESPITE REPEATED RED FLAGS. Status: Final Sanction Detail: THE FIRM IS FINED $100,002, IN THIS PROCEEDING. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRM FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNED TO SYSTEMATICALLY MANAGE THE REGULATORY AND OTHER RISKS OF PROVIDING MARKET ACCESS. AS A RESULT, THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 15C3-5.

Allegations: NASD RULES 2110, 2320, 5430(A), 5430(A)- THE FIRM FAILED TO TRANSMIT THROUGH ACT LAST SALE REPORTS OF TRANSACTIONS WITHIN 90 SECONDS AFTER EXECUTION; AND IN 23 OCCASIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICE WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $27,500 ($20,000 FOR TRADE REPORTING AND $7,500 FOR NOT OBTAINING THE MOST FAVORABLE PRICE POSSIBLE UNDER PREVAILING MARKET CONDITIONS)AND RESTITUTION TO CLIENTS OF $742.22 PLUS INTEREST. Summary: OF THE 23 TRANSACTIONS THAT DID NOT RECEIVE THE MOST FAVORABLE PRICE POSSIBLE UNDER PREVAILING MARKET CONDITIONS, THE AVERAGE RESTITUTION WAS LESS THAN $35.00.

Allegations: FROM JANUARY 1, 2005 THROUGH APRIL 30, 2005, THE FIRM DID NOT ACCEPT OR DECLINE IN THE NASDAQ MARKET CENTER ("NMC"), WITHIN TWENTY MINUTES AFTER EXECUTION TRANSACTIONS IN ELIGIBLE SECURITIES, A VIOLATION OF NASD MARKETPLACE RULE 6130(B). FURTHERMORE, THE FIRM DID NOT TRANSMIT LAST SALE REPORTS OF OTC EQUITY SECURITIES WITHIN 90 SECONDS AFTER EXECUTION NOR DESIGNATE SUCH REPORTS AS LATE DURING THE SAME PERIOD. IN ADDITION, THE SHORT INTEREST REPORT ON ONE STOCK WAS REPORTED INCORRECTLY IN APRIL 2004. THE FIRM'S SUPERVISORY SYSTEMS AND WRITTEN PROCEDURES WERE INEFFECTIVE TO ACHIEVE COMPLETE COMPLIANCE WITH THE SHORT INTEREST REPORTING REQUIREMENTS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $32,500. Summary: WITH RESPECT TO VIOLATION OF NASD RULE 6130(B), PLEASE NOTE THAT THE FIRM IS NOT RESPONSIBLE FOR TECHNICAL ISSUE CAUSED BY AN OUTSIDE VENDOR ON ITS SYSTEM. UPON DISCOVERY OF THE ISSUE, THE FIRM TOOK IMMEDIATE ACTION WITH THE OUTSIDE VENDOR AND HAS SINCE THEN CORRECTED THE ISSUE.

Allegations: NASD ALLEGED THAT THE FIRM DID NOT CONTINUOUSLY MAINTAIN TWO-SIDED QUOTATIONS IN THE ABSENCE OF THE GRANT OF AN EXCUSED WITHDRAWAL OR A FUNCTIONAL EXCUSED WITHDRAWAL BY THE SRO DURING THE PERIODS OF JULY 1 THROUGH SEPTEMBER 30, 2005 AND FROM APRIL 1 THROUGH JUNE 30, 2006. DURING THE ABOVE-MENTIONED PERIODS, THE FIRM WAS REGISTERED WITH NASD AS AN INTERMARKET TRADING SYSTEM/COMPUTER ASSISTED EXECUTION SYSTEM ("ITS/CAES") MARKET MAKER. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $5,000. Summary: PLEASE NOTE THAT NASDAQ AUTOMATICALLY REMOVES MARKET MAKER QUOTES WHENEVER THERE ARE ANY CORPORATE ACTIONS (I.E. PAYMENT OF DIVIDENDS), AND WHEN THIS HAPPENS MARKET MAKERS ARE CONSIDERED TO BE IN AN EXCUSED STATE IF NO NEW QUOTES ARE POSTED. DURING THE PERIOD OF JULY 1 THROUGH SEPTEMBER 30, 2005, THE NASDAQ SYSTEM REMOVED THE FIRM'S QUOTES BECAUSE OF DIVIDENDS BEING PAID BY THE ETF'S THE FIRM MADE MARKETS IN. SINCE THE FIRM NEVER UPDATED ITS QUOTES IN THE ETF'S IN QUESTION, THE FIRM WAS EXCUSED AND WITHDRAWN AS A MARKET MAKER IN THESE SECURITIES THUS ELIMINATING THE NEED TO POST TWO-SIDED QUOTES.

Allegations: IN THE RESULT OF THE 2004 AND 2005 TRADING AND MARKET MARKING SURVEILLANCE EXAMINATIONS, NASD ALLEGED THAT THE FIRM IS IN VIOLATION OF MARKETPLACE RULES 4632 AND 6130, NASD RULE 3110, SEC RULE 200(G), INEFFECTIVE SUPERVISORY PROCEDURES, AND OATS VIOLATIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $35,000.00. Summary: PLEASE NOTE THAT THE FIRM HAS CONDUCTED AN INTERNAL INVESTIGATION IN REGARDS TO THE MATTER. THE FIRM IS EVALUATING THE ADOPTION OF NEW INFORMATION SYSTEMS FOR PROPRIETARY TRADING OPERATIONS. IN ADDITION, THE FIRM HAS AMENDED ITS WRITTEN SUPERVISORY PROCEDURES, SPECIFICALLY IN THE AREAS OF MULTIPLE MPIDS, BEST EXECUTION, TRADE REPORTING, AND OTHER REGULATORY OBLIGATIONS.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED, WITHIN 10 SECONDS AFTER EXECUTION, TO TRANSMIT LAST SALE REPORTS OF TRANSACTIONS IN NMS SECURITIES TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) AND FAILED TO REPORT THE CORRECT TIME OF EXECUTION TO THE FNTRF IN THAT IT FAILED TO APPEND THE STOP STOCK TIME ON LAST SALE REPORTS OF TRANSACTIONS IN NMS SECURITIES. THE FINDINGS STATED THAT THE FIRM FAILED TO ADEQUATELY SUPERVISE ITS TRADE REPORTING AND INPUT OF TRADE DATA TO THE FNTRF. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO A CENSURE AND FINE OF $20,000. Summary: THE FIRM WAS CENSURED AND FINED $20,000. THE FINE WAS PAID JANUARY 18 2017.

Allegations: ***DUPLICATE DRD FILED IN ERROR/ SEE OCCURRENCE #612287*** WMS WAS ALLEGED TO BE IN VIOLATION OF "FIRM QUOTE RULE" NASD RULE 3320 AND NASD RULE 4613(B). Status: Final Sanction Detail: IN ORDER TO AVOID THE EXPENSE AND CONSUMPTION OF TIME REQUIRED TO RESPOND TO THIS INQUITY, WMS CONSENTED TO A CENSURE AND A FINE OF $8000.00 TO SETTLE ALLEGATIONS OF VIOLATIONS RELATING TO THE "FIRM QUOTE RULE" NASD RULE 3320 AND NASD RULE 4613(B). WMS PAID TOTAL FINE OF $8000.00 ON 5/11/1999. FIRM WRITTEN SUPERVISORY PROCEDURES WERE REVISED TO BE IN COMPLIANCE WITH "FIRM QUOTE RULE". Summary: WMS WAS ALLEGED TO HAVE VIOLATED FIRM QUOTE RULES SEC RULE 11AC1-1, NASD RULE 3320 AND NASD RULE 4613(B) AND FAILED TO ESTABLISH AND MAINTAIN WRITTEN SUPERVISORY PROCEDURES TO BE IN COMPLIANCE WITH FIRM QUOTE RULES. IN ORDER TO AVOID EXPENSE AND CONSUMPTION OF TIME REQUIRED TO RESPOND TO INQUIRY, WMS CONSENTED TO A CENSURE AND FINE OF $8000.00 AND AN UNDERTAKING TO REVISE FIRM'S WRITTEN SUPERVISORY PROCEDURES. TOTAL FINE PAID ON 5/11/1999 AND WRITTEN SUPERVISORY PROCEDURES HAVE BEEN REVISED.

Allegations: WEDBUSH MORGAN SECURITIES, WITHOUT ADMITTING OF DENYING ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER & CONSENT, CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS ON A FEW OCCASIONS THAT IT WAS A PARTY TO A LOCKED OR CROSSED MARKET CONDITION PRIOR TO MARKET OPENING AND FAILED TO FILL AN INCOMING-TRADE-MOVE MESSAGE FOR THE FULL SIZE OF THE MESSAGE OR MOVE ITS MARKET WITHIN 30 SECONDS. Status: Final Sanction Detail: $20,000.00 FINED Summary: WEDBUSH MORGAN, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SUBMITTED A LETTER OF ACCEPTANCE, WAIVER & CONSENT, CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCASIONS THAT IT WAS A PARTY TO A LOCKED OR CROSSED MARKET CONDITION PRIOR TO MARKET OPENING AND FAILED TO FILL AN INCOMING TRADE-OR-MOVE MESSAGE FOR THE FULL SIZE OF THE MESSAGE OR MOVE ITS MARKET WITHIN 30 SECONDS. THE FIRM WAS CENSURED AND FINED $20,000.00.

Allegations: WEDBUSH MORGAN SECURITIES FAILED TO HONOR ITS PUBLISHED QUOTATIONS. Status: Final Sanction Detail: $15,000.00 FINED Summary: WEDBUSH MORGAN SECURITIES WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER & CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT IT FAILED ON A FEW OCCASIONS TO HONOR ITS PUBLISHED QUOTATIONS. THE FIRM WAS CENSURED, FINED $15,000.00 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES RELATING TO FIRM QUOTE COMPLIANCE.

Allegations: WITHOUT ADMITTING OR DENYING ALLEGATIONS THAT IT FAILED TO TRANSMIT 78 TRANSACTION REPORTS IN OTC SECURITIES THROUGH ACT WITHIN 90 SECONDS AFTER EXECUTION BETWEEN SEPT 1,2002,WEDBUSH MORGAN SECURITIES CONSENTED TO A CENSURE A FINE OF $7500.00 Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,WEDBUSH MORGAN SECURITIES INC.CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $7500.00. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,WEDBUSH MORGAN SECURITIES INC.CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $7500.00.

Allegations: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,WMS CONSENTED TO THE ENTRY FINDINGS THAT IT FAILED WITHIN 90 SECONDS AFTER EXECUTION, TO TRANSMIT THROUGH ACT LAST SALE REPORTS OF TRANSACTIONS AND FAILED TO DESIGNATE AS "T". INCORRECTLY DESIGNATED AS "T", LAST SALE REPORTS OF TRANSACTIONS IN NNM SECURITIES EXECUTED DURING NORMAL MARKET HOURS. Status: Final Sanction Detail: A FINE OF $5,000.00 Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WMS CONSENTED TO THE ENTRY OF FINDINGS THAT IT FAILED WITHIN 90 SECONDS AFTER EXECUTION, TO TRANSMIT THROUGH ACT LAST SALE REPORTS OF TRANSACTIONS AND FAILED TO DESIGNATE AS "T" REPORTS OF TRANSACTION EXECUTED OUTSIDE NORMAL MARKET HOURS AND INCORRECTLY DESIGNATED AS "T" LAST SALE REPORTS OF TRANSACTIONS IN NNM SECURITIES EXECUTED DURING NORMAL MARKET HOURS.

Allegations: WMS WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER & CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCATIONS FAILED TO DISPLAY IMMEDIATELY CUSTOMER LIMIT ORDERS IN ITS PUBLIC QUOTATION,WHEN SUCH ORDER WAS AT PRICE WHICH WOULD HAVE IMPROVED THE FIRM'S BID OR OFFER,OR WHEN THE ORDER WAS PRICED EQUAL TO THE FIRM'S BID OR OFFER AND THE NATIONAL BEST BID OR OFFER IN SUCH SECURITY Status: Final Sanction Detail: $10,000.00 FINED Summary: WEDBUSH MORGAN SECURITIES, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER,& CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCASIONS IT FAILED TO DISPLAY IMMEDIATELY CUSTOMER LIMIT ORDERS IN ITS PUBLIC QUOTATION,WHEN SUCH ORDER WAS AT A PRICE WHICH WOULD HAVE IMPROVE THE FIRM'S BID OR OFFER,OR WHEN THE ORDER WAS PRICED EQUAL TO THE FIRM'S BID OR OFFER AND WHEN THE NATIONAL BEST BID OR OFFER IN SUCH SECURITY. THE FIRM WAS CENSURED AND FINED $10,000.00.

Allegations: RESPONDENT:ENTERED PRICED ORDERS INTO SELECTNET BROADCAST THAT WERE PRICED BETTER THE FIRM'S PUBLICE QUOTE WITHOUT REFLECTING EACH SUCH ORDER IN THE FIRM'S PUBLIC QUOTE;AND FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE ADEQUATE WRITTEN SUPERVISORY PROCEDURES DESIGNED TO ACHIEVE COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS AND REGULATIONS CONCERNING THE SEC'S ORDER HANDLING RULES AND NASD MARKETPLACE RULE 4613.(SEC RULE 11AC1-1(C)(5) AND NASD CONDUCT RULES 2110 AND 3010). Status: Final Sanction Detail: FINE OF $3,000.00****4/1/2000 GS: $3,000.00 PAID ON 12/07/1999-INVOICE #99-MS858. Summary: RESPONDENT: ENTERED PRICED ORDERS INTO SELECTNET BROADCAST THAT WERE PRICED BETTER THAN THE FIRM'S PUBLIC QUOTE WITHOUT REFLECTING EACH SUCH ORDER IN THE FIRM'S PUBLIC QUOTE;AND FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE ADEQUATE WRITTEN SUPERVISORY PROCEDURES DESIGNED TO ACHIEVE COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS AND REGULATIONS CONCERNING THE SEC'S ORDER HANDLING RULES AND NASD MARKETPLACE RULE 4613.(SEC RULE 11AC1-1(C)(5)AND NASD CONDUCT RULES 2110 AND 3010.

Allegations: NASD RULE 2110, RESPONDENT MEMBER,ACTING THROUGH RESPONDENT HARLAN FAILED TO FILE AN MSRB FORM G-37 Status: Final Sanction Detail: FINE OF $250.00 -PAID J&S ON 10/30/1997, INVOICE #97-02-919 Summary: ON OCTOBER 6,1997, DIST #2 NOTIFIED RESPONDENTS WEDBUSH MORGAN SECURITIES INC. AND ROBERT DURLING HARLAN, JR. THAT THE LETTER OR ACCEPTANCE, WAIVER AND CONSENT #C02970040 WAS ACCEPTED;THEREFORE, THEY ARE CENSURED AND FINED $250,JOINTLY AND SEVERALLY(NASD RULE 2110-RESPONDENT MEMBER,ACTING THROUGH RESPONDENT HARLAN FAILED TO FILE AN MSRB FORM G-37 DISCLOSING THIS UNDERWRITING;AND FAILED TO TIMELY FILE AN MSRB FORM G-37 DISCLOSING A POLITICAL CONTRIBUTION).

Allegations: WMS ALLEGED TO BE IN VIOLATION OF NASD CONDUCT RULES 3110 AND SEC RULE 17 A-3. Status: Final Sanction Detail: WMS PAID FINE IN THE AMOUNT OF $2,500.00. Summary: ON 9/27/2001,WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WEDBUSH SIGNED AN ACCEPTANCE AND CONSENT TO FINDINGS THAT ON A SINGLE TRADE DATE IT FAILED TO STAMP 11 MANUAL ORDERS PROMPTLY UPON RECEIPT AND AGREED TO PAY A FINE IN THE AMOUNT OF $2,500.00 TO NASD REG. INC.

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT CREATED AND PRODUCED TO FINRA FALSIFIED AND MISLEADING DOCUMENTS, IN CONNECTION WITH ITS REVIEW OF THE FIRM'S REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS BETWEEN OCTOBER 1, 2011 AND DECEMBER 31, 2011. THE COMPLAINT ALLEGE THAT THE FIRM FABRICATED MUNICIPAL SECURITIES TRANSACTION REPORT CARDS (MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) REPORT CARDS) BY WHITING-OUT DATE INFORMATION AND ADDING SUPERVISORY SIGNATURES THAT GAVE THE FALSE IMPRESSION THAT THE FIRM CONDUCTED AND EVIDENCED SUPERVISORY REVIEWS OF MSRB REPORT CARDS DURING THE REVIEW PERIOD, WHEN IN FACT THE FIRM HAD NOT CONDUCTED SUCH SUPERVISORY REVIEWS. AS A RESULT, THE FIRM WILLFULLY VIOLATED MSRB RULE G-17. THE COMPLAINT ALSO ALLEGES THAT THE FIRM REPORTED MUNICIPAL SECURITIES TRANSACTIONS TO THE MSRB IN AN UNTIMELY MANNER, FAILED TO CONDUCT SUPERVISORY REVIEWS OF MSRB REPORT CARDS, AND FAILED TO DESIGNATE A REGISTERED PRINCIPAL WITH RESPONSIBILITY TO CONDUCT SUPERVISORY REVIEWS OF THE FIRM'S REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS. AS A RESULT, THE FIRM WILLFULLY VIOLATED MSRB RULES G-14 AND G-27. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $130,000 AND IS REQUIRED TO REMEDIATE THE SUPERVISORY VIOLATIONS Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT CREATED AND PRODUCED TO FINRA STAFF FALSIFIED AND MISLEADING DOCUMENTS, IN CONNECTION WITH THE STAFFS REVIEW OF THE FIRM'S REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS. THE FINDINGS STATED THAT THE FIRM ALTERED MSRB REPORT CARDS BY WHITING-OUT DATE INFORMATION AND ADDING SUPERVISORY SIGNATURES THAT GAVE THE FALSE IMPRESSION THAT THE FIRM CONDUCTED AND EVIDENCED SUPERVISORY REVIEWS OF MSRB REPORT CARDS, WHEN IN FACT THE FIRM HAD NOT CONDUCTED SUCH SUPERVISORY REVIEWS. THE FINDINGS ALSO STATED THAT THE FIRM REPORTED AT LEAST 55 MUNICIPAL SECURITIES TRANSACTIONS TO THE MSRB IN AN UNTIMELY MANNER, FAILED TO CONDUCT SUPERVISORY REVIEWS OF MSRB REPORT CARDS, AND FAILED TO DESIGNATE A REGISTERED PRINCIPAL WITH RESPONSIBILITY TO CONDUCT SUPERVISORY REVIEWS OF THE FIRM'S REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS. THERE WERE NO WILLFUL FINDINGS.

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT ITS SUPERVISORY SYSTEMS AND PROCEDURES GOVERNING MARKET ACCESS WERE DEFICIENT IN NUMEROUS WAYS. THE COMPLAINT ALLEGES THAT DESPITE NUMEROUS RED FLAGS THAT SHOULD HAVE ALERTED THE FIRM TO THE TYPES OF POTENTIAL MANIPULATION BY ITS MARKET ACCESS CUSTOMERS, ITS WSPS CONTINUED TO LACK REASONABLE OR ANY PROCEDURES AND REVIEWS FOR VARIOUS TYPES OF PRICE MANIPULATION, INCLUDING LAYERING, SPOOFING, PRE-ARRANGED TRADING, AUTO-EXECUTION MANIPULATION, EXCESSIVE ORDER ENTRY AND MARKING-THE-CLOSE, AND CONTAINED FUNDAMENTAL FLAWS WITH RESPECT TO ESTABLISHED REVIEWS. THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE WSPS REASONABLY DESIGNED TO SUPERVISE THE TYPES OF BUSINESS IN WHICH IT WAS ENGAGED AND TO SUPERVISE THE ACTIVITIES OF REGISTERED REPRESENTATIVES, REGISTERED PRINCIPALS AND OTHER ASSOCIATED PERSONS THAT WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND NASDAQ RULES, INCLUDING RULE 15C3-5. THE COMPLAINT ALSO ALLEGES THAT THE FIRM FAILED TO APPROPRIATELY CONTROL THE RISKS ASSOCIATED WITH PROVIDING ITS CUSTOMERS WITH MARKET ACCESS SO AS NOT TO JEOPARDIZE THE FIRM'S AND OTHER MARKET PARTICIPANTS' FINANCIAL CONDITION AND THE INTEGRITY OF THE TRADING ON THE SECURITIES MARKETS, AS REQUIRED BY SEC RULE 15C3-5. THE FIRM FAILED TO ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNED TO MANAGE THE FINANCIAL, REGULATORY, AND OTHER RISKS OF PROVIDING MARKET ACCESS, AS REQUIRED BY RULE 15C3-5(B). THE FIRM FAILED TO ENSURE, AS REQUIRED BY RULE 15C3-5(C), THAT IT HAD IN PLACE APPROPRIATE REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES. THE FIRM FAILED TO ENSURE THAT IT HAD ADEQUATE RISK MANAGEMENT CONTROLS TO PREVENT THE ENTRY OF ERRONEOUS ORDERS, BY REJECTING ORDERS THAT EXCEED APPROPRIATE PRICE OR SIZE PARAMETERS, ON AN ORDER-BY-ORDER BASIS OR OVER A SHORT PERIOD OF TIME. IT FAILED TO ENSURE THAT ITS REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES WERE UNDER ITS DIRECT AND EXCLUSIVE CONTROL, AS REQUIRED BY RULE 15C3-5(D). IT FAILED TO REASONABLY ALLOCATE, BY WRITTEN CONTRACT, AFTER A THOROUGH DUE DILIGENCE REVIEW, CONTROL OVER SPECIFIC REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES TO A BROKER-DEALER CUSTOMER. THE FIRM FAILED TO ADEQUATELY REVIEW THE PERFORMANCE OF BROKER-DEALERS TO WHOM IT HAS ALLOCATED CERTAIN REGULATORY RESPONSIBILITIES. THE FIRM FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM FOR REGULARLY REVIEWING THE EFFECTIVENESS OF THE RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES AS REQUIRED BY RULE 15C3-5(E). THUS, AS DETAILED, THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE EXCHANGE ACT OF 1934, AND RULE 15C3-5 THEREUNDER. THE COMPLAINT FURTHER ALLEGES THAT THE FIRM ESTABLISHED A COMPENSATION SYSTEM RIFE WITH POTENTIAL CONFLICTS OF INTEREST. THE FIRM THEREBY KNOWINGLY AND DELIBERATELY CREATED A DISINCENTIVE FOR ITS EMPLOYEES TO CONDUCT RIGOROUS AND EFFECTIVE MONITORING AND CURTAIL POTENTIAL VIOLATIVE ACTIVITY. MOREOVER, DESPITE ITS RECEIPT OF NUMEROUS REGULATORY INQUIRIES AS WELL AS EXCHANGE-GENERATED REPORTS IDENTIFYING HUNDREDS OF WASH TRADES ON A DAILY BASIS, THE FIRM TOOK NO STEPS TO CURTAIL WASH TRADES. THROUGH SUCH KNOWING AND DELIBERATE CONDUCT, IT ENABLED ARTIFICIALLY ELEVATED, DISTORTED AND MISLEADING TRADING VOLUMES OF MULTIPLE SECURITIES ACROSS MULTIPLE EXCHANGES. THE FIRM HANDSOMELY PROFITED FROM ITS ABJECT FAILURE TO REASONABLY MONITOR AND DETECT THOUSANDS OF INSTANCES OF POTENTIAL MANIPULATIVE ACTIVITY BY THE SAME RECIDIVIST CUSTOMERS, DESPITE REPEATED RED FLAGS. THE TREMENDOUS VOLUME GENERATED FROM THESE UNREGISTERED, FOREIGN, ANONYMOUS TRADERS SUBSTANTIALLY CONTRIBUTED TO ITS STATUS AS A LEADING LIQUIDITY AND VOLUME PROVIDER, AS WELL AS EXCHANGE REBATES AND REDUCED FEES. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED A TOTAL OF $566,666 IN CONNECTION WITH THIS PROCEEDING Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT AS REQUIRED BY SEC RULE 15C3-5(D)THE FIRM FAILED TO REASONABLY ALLOCATE, BY WRITTEN CONTRACT, AFTER A THOROUGH DUE DILIGENCE REVIEW, CONTROL OVER SPECIFIC REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES TO A BROKER-DEALER CUSTOMER. THE FIRM FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM FOR REGULARLY REVIEWING THE EFFECTIVENESS OF THE RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES AS REQUIRED BY SEC RULE 15C3-5(E). AS A RESULT, THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE SECURITIES EXCHANGE ACT OF 1934, AND SEC RULE 15C3-5 THEREUNDER, AND VIOLATED NASDAQ RULE 2110 AND NASDAQ RULE 2010A.

Allegations: DURING THE REVIEW PERIOD, WEDBUSH REPORTED (I) APPROXIMATELY 118,785 INSTANCES TO THE LARGE OPTIONS POSITIONS REPORT ("LOPR") WITHOUT THE TAX ID OR TAX ID TYPE. (II) APPROXIMATELY 51,385 INSTANCES TO THE LOPR WITH THE "ACCOUNT ADDRESS CITY" FIELD INCORRECTLY POPULATED WITH "NO CITY"; (III) APPROXIMATELY 62,482 INSTANCES WITH THE "ACCOUNT STREET ADDRESS" FIELD INCORRECTLY POPULATED WITH "STREET NOT FOUND" AND (IV) 188 INSTANCES FOR ONE ACCOUNT WITH THE INCORRECT "ACCOUNT NAME" FIELD. ALSO DURING THE REVIEW PERIOD, WEDBUSH ALSO FAILED TO REPORT THE CORRECT EFFECTIVE DATE TO THE LOPR FOR AN UNKNOWN NUMBER OF POSITIONS; A SAMPLE REVIEWED BY STAFF DURING THE PERIOD BETWEEN JANUARY 19, 2010 & MARCH 28, 2013 REVEALED THAT WEDBUSH HAD REPORTED APPROXIMATELY 3,144 POSITIONS WITHOUT THE CORRECT EFFECTIVE DATE AS A RESULT OF ERRORS RELATED TO THE FIRMS THIRD PARTY VENDORS PROCESSING OF CERTAIN TRADES. DURING THE REVIEW PERIOD BETWEEN JANUARY 19 & JUNE 7, 2012, WEDBUSH ALSO FAILED TO REPORT TO LOPR APPROXIMATELY 100,2326 INSTANCES THAT WERE CONNECTED TO THE FIRMS JOINT BACK OFFICE ACCOUNT. THE CONDUCT DESCRIBED ABOVE VIOLATED ISE RULE 415(A). DURING THE REVIEW PERIOD, WEDBUSH FAILED TO HAVE ADEQUATE SUPERVISORY SYSTEMS AND CONTROLS IN PLACE, INCLUDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW AND WRITTEN POLICIES & PROCEDURES, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE EXCHANGES OPTIONS POSITIONS REPORTING REQUIREMENTS. THE CONDUCT ABOVE VIOLATED ISE RULE 401. Status: Final Sanction Detail: WEDBUSH FINED $90,000

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT WILLFULLY VIOLATED SECTION 15(C) OF THE EXCHANGE ACT OF 1934, EXCHANGE ACT RULE 15C3-3(B) (1) THEREUNDER, AND FINRA RULE 2010 BY CREATING OR INCREASING DEFICITS IN THE NUMBER OF SECURITIES REQUIRED TO BE IN THE FIRM'S POSSESSION OR CONTROL. THE COMPLAINT ALLEGES THAT THE FIRM WILLFULLY VIOLATED SECTION 15(C) OF THE EXCHANGE ACT OF 1934, EXCHANGE ACT RULE 15C3-3(E) THEREUNDER, AND FINRA RULE 2010 BY FAILING TO ACCURATELY CALCULATE ITS CUSTOMER RESERVE FORMULA AND ADEQUATELY FUND ITS CUSTOMER RESERVE ACCOUNT IN ACCORDANCE WITH THE CUSTOMER PROTECTION RULE, WHICH RESULTED IN HINDSIGHT DEFICIENCIES. THE COMPLAINT ALSO ALLEGES THAT THE FIRM FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM, INCLUDING WRITTEN PROCEDURES, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH BOTH THE POSSESSION AND CONTROL REQUIREMENT AND THE CUSTOMER RESERVE REQUIREMENTS OF THE CUSTOMER PROTECTION RULE. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $1.5 MILLION AND REQUIRED TO SUBMIT AN UNDERTAKING PURSUANT TO WHICH THE FIRM'S PRESIDENT, OR HIS SUCCESSOR-IN-INTEREST, SHALL WITHIN 30 DAYS OF THE COMPLETION OF THE FIRM'S IMPLEMENTATION OF THE RECOMMENDATIONS RECEIVED FROM THE INDEPENDENT CONSULTANT TO BE RETAINED BY THE FIRM IN CONNECTION WITH THE ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, PURSUANT TO SECTIONS 15(B) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(E) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER, ENTERED CONCURRENTLY HEREWITH WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, CERTIFY IN WRITING TO FINRA THAT, AS OF THE DATE OF THE CERTIFICATION, THE FIRM HAS IN PLACE POLICIES, SYSTEMS AND PROCEDURES TO ADDRESS AND CORRECT THE VIOLATIONS DESCRIBED IN THIS OFFER OF SETTLEMENT. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN 30 SEPARATE INSTANCES, THE FIRM CREATED AND/OR INCREASED DEFICITS IN ITS SEGREGATION REQUIREMENT THROUGH DELIVERIES OR RETURNS OF SECURITIES. THE FINDINGS ALSO STATED THAT ON 14 OCCASIONS THE FIRM IMPROPERLY CALCULATED ITS CUSTOMER RESERVE FORMULA, WHICH, ON EIGHT OCCASIONS, RESULTED IN HINDSIGHT DEFICIENCIES BETWEEN $945,000 AND $77 MILLION. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM, INCLUDING WRITTEN PROCEDURES, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH BOTH THE POSSESSION OR CONTROL REQUIREMENT AND THE CUSTOMER RESERVE ACCOUNT REQUIREMENT OF THE CUSTOMER PROTECTION RULE. UNDER THE TERMS OF THE OFFER, THE FIRM HAS ALSO CONSENTED, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS AND TO THE ENTRY OF FINDINGS AND VIOLATIONS ARISING OUT OF EXAMINATIONS CONDUCTED BY FINRA IN 2014, 2015 AND 2016, AS DESCRIBED BELOW, AND TO THE IMPOSITION OF THE SANCTIONS CONTAINED HEREIN. THE ADDITIONAL FINDINGS ARE AS FOLLOWS: FROM NOVEMBER 2015 THROUGH MARCH 2016, THE FIRM HELD MULTIPLE POSITIONS IN CERTIFICATES OF DEPOSIT (CDS) ISSUED BY MAJOR FINANCIAL INSTITUTIONS FOR WHICH THERE WAS NO "READY MARKET," FOR OVER FIVE BUSINESS DAYS, BUT FAILED TO DEDUCT THE VALUE OF EACH POSITION EXCEEDING 30% OF THE FIRM'S TENTATIVE NET CAPITAL. THE FIRM CREATED AND MAINTAINED INACCURATE BOOKS AND RECORDS THAT INACCURATELY REPORTED THE AMOUNTS THE FIRM WAS REQUIRED TO MAINTAIN IN ITS CUSTOMER RESERVE ACCOUNT. ADDITIONALLY, INACCURATELY REPORTED ITS NET CAPITAL.

Allegations: THE BCC SUBCOMMITTEE DETERMINED WEDBUSH MAY HAVE VIOLATED EXCHANGE RULE 6.15(A) IN WHICH IT FAILED TO REPORT LARGE TRADER POSITIONS IN MULTIPLE INSTANCES JANUARY 2015 THROUGH APRIL 2015 AND SEPTEMBER 2015 THROUGH OCTOBER 2015. ALSO, WEDBUSH MAY HAVE VIOLATED EXCHANGE RULE 4.01 IN WHICH IT FAILED TO HAVE AN ADEQUATE PROCESS OR PROCEDURE IN PLACE. Status: Final Sanction Detail: WEDBUSH PAID A FINE OF $20,000 AND AGREED TO CEASE AND DESIST FROM FUTURE VIOLATIONS OF EXCHANGE RULE 6.15(A) Summary: WEDBUSH PAID A FINE OF $20,000 AND AGREED TO CEASE AND DESIST FROM FUTURE VIOLATIONS OF EXCHANGE RULE 6.15(A)

Allegations: IT IS ALLEGED THAT WEDBUSH: (I)FAILED TO MARK NUMEROUS ORDERS WITH THE PROPER ORIGIN CODE; (II) FAILED TO MAINTAIN ACCURATE BOOKS AND RECORDS AS A RESULT OF MISMARKING NUMEROUS AGENCY ORDERS WITH PRINCIPAL ORDER ORIGIN CODES; (III) FAILED TO IMPLEMENT ADEQUATE SUPERVISORY POLICIES AND PROCEDURES RELATED TO ORIGIN CODE MARKING ON CBSX; AND FAILED TO SUPERVISE TO ASSURE COMPLIANCE WITH THE ORDER ORIGIN CODE MARKING REQUIREMENTS ON CBSX. (VIOLATION OF EXCHANGE RULES 4.2, 6.51 AND 15.1, AND SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-3 THEREUNDER) Status: Final Sanction Detail: A $25,000 FINE AND A CENSURE. Summary: A $25,000 FINE AND A CENSURE.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ENGAGED IN TRADING UNIT AGGREGATION BUT FAILED TO ENSURE THAT INDIVIDUAL TRADERS WERE ASSIGNED TO ONLY ONE AGGREGATION UNIT (AGU) AT ANY TIME, THAT AGU'S HAD OPERATED AUTONOMOUSLY AND ENGAGED IN SEPARATE TRADING STRATEGIES WITHOUT REGARD TO OTHER TRADING UNITS, AND THAT AGU'S HAD NOT COORDINATED TRADING ACTIVITIES OR INTERACTED OR SHARED ORDER OR POSITION INFORMATION. THE FINDINGS STATED THAT THE FIRM EMPLOYED FOUR INDIVIDUALS WHO ACTED AS BOTH A TRADER IN ONE AGU AND AS A TRADER OR SUPERVISOR IN ANOTHER AGU, INCLUDING TWO INDIVIDUALS WHO SERVED IN SUCH DUAL CAPACITIES. SUCH ARRANGEMENT IS IMPROPER BECAUSE IT COULD RESULT IN THE COORDINATION OF TRADING STRATEGIES OR TRADING BASED UPON POSITION OR TRADING INFORMATION OF THE OTHER AGU. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO PROVIDE ADEQUATE SUPERVISION TO MONITOR FOR COMPLIANCE WITH RULE 200(F) OF REGULATION SHO. AGGREGATION OF A UNIT'S INDEPENDENT NET POSITION PRIOR TO EACH SALE LIMITS THE POTENTIAL FOR ABUSE ASSOCIATED WITH COORDINATION AMONG UNITS. THE FIRM'S WRITTEN PLAN OF ORGANIZATION REFLECTED UNCLEAR STRATEGIES, STRATEGIES THAT OVERLAPPED FOR MULTIPLE AGUS AND TRADERS THAT ALSO ACTED AS TRADERS OR SUPERVISORS IN OTHER AGUS. THE FIRM ALSO LACKED ADEQUATE WRITTEN SUPERVISORY PROCEDURES (WSPS) AND SUPPORTING DOCUMENTATION REFLECTING ITS CREATION AND APPROVAL OF AGUS AND ITS SUPERVISION OF TRADERS. THE FINDINGS ALSO INCLUDED THAT THE FIRM TRANSMITTED TO OATS REPORTS THAT CONTAINED INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA. THE FIRM FAILED TO REPORT TO OATS NON-MARKET MAKING PROPRIETARY ORDERS AND ERRONEOUSLY SUBMITTED POST-TRADE ALLOCATIONS AS REPORTABLE ORDER EVENTS TO OATS. FINRA FOUND THAT THE FIRM FAILED ON 26 OCCASIONS TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMER THAT A TRANSACTION WAS EXECUTED BY THE FIRM AT AN AVERAGE PRICE, THAT TRANSACTION DETAILS WERE AVAILABLE UPON REQUEST, AND/OR ITS CAPACITY IN THE TRANSACTION. FINRA ALSO FOUND THAT THE FIRM INACCURATELY MARKED SHORT SELL ORDERS AS LONG. IN ADDITION, FINRA DETERMINED THAT THE FIRM ACCEPTED A SHORT SALE ORDER IN AN EQUITY SECURITY FROM ANOTHER PERSON, OR EFFECTED A SHORT SALE IN AN EQUITY SECURITY FOR ITS OWN ACCOUNT, WITHOUT BORROWING THE SECURITY, OR ENTERING INTO A BONAFIDE ARRANGEMENT TO BORROW THE SECURITY OR HAVING REASONABLE GROUNDS TO BELIEVE THAT THE SECURITY COULD BE BORROWED SO THAT IT COULD BE DELIVERED ON THE DATE DELIVERY IS DUE AND DOCUMENTING COMPLIANCE WITH RULE 203(B)(1) OF REGULATION SHO Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $110,000. Summary: THE FIRM WAS CENSURED AND FINED $110,000.

Allegations: A FINRA HEARING OFFICER CONSIDERED AN OFFER OF SETTLEMENT AND CONSENT ENTERED INTO BETWEEN FINRA ON BEHALF OF NYSE ARCA INC. AND THE FIRM. THE FIRM ENTERED INTO AN OFFER OF SETTLEMENT AND CONSENT FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TO IN THE OFFER OF SETTLEMENT. THE HEARING OFFICER ACCEPTS THE OFFER OF SETTLEMENT AND CONSENT AND ISSUES THIS DECISION. THE FINDINGS STATED THAT THIS MATTER INVOLVES THE FIRM'S FAILURE TO COMPLY WITH SUPERVISION REQUIREMENTS OF NYSE ARCA EQUITIES RULE 6.18 REGARDING THE CLOSE-OUT REQUIREMENTS OF RULE 204 OF REGULATION SHO, SECURITIES EXCHANGE ACT OF 1934 (RULE 204). THE FIRM'S SUPERVISORY SYSTEM WAS NOT REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH THE REQUIREMENTS OF RULE 204(A) OF REGULATION SHO. SPECIFICALLY, THE FIRM'S ALLOCATION STRATEGY CONTRAVENED REGULATORY PRINCIPLES AND RULE 204, BECAUSE IT DID NOT INHERENTLY ENSURE FAILS WERE BEING PROPERLY CLOSED OUT AND OR ALLOCATED IN ACCORDANCE WITH RULE 204(D) OF REGULATION SHO, AND THUS RESULTED IN AN INCREASE IN THE NUMBER OF SECURITIES THAT WERE REQUIRED TO BE CLOSED OUT, RESULTING IN RECURRING FAILS. THIS FAILURE RESULTED IN THE FIRM EFFECTING SHORT SALE TRANSACTIONS FOR CERTAIN CORRESPONDENT BROKER-DEALERS THAT INCREASED THE FAILURE TO DELIVER POSITIONS. FINALLY, THE FIRM ALSO FAILED TO PROPERLY CLOSE OUT A FAIL THAT RESULTED FROM ONE OF ITS RETAIL CLIENTS' TRADING ACTIVITY. THE FINDINGS ALSO STATED THAT THE FIRM'S OPERATIONAL PROCESSES AND SYSTEMS WERE NOT REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH THE REQUIREMENTS OF RULE 204 OF REGULATION SHO. SPECIFICALLY, THE OPERATIONAL REPORTS THE FIRM USED TO IDENTIFY FAILS DID NOT INCLUDE CERTAIN EXCHANGE-LISTED SECURITIES SUBJECT TO THE CLOSE-OUT PROVISIONS OF RULE 204(A). AS A RESULT, THE FIRM FAILED TO IDENTIFY AND PROPERLY CLOSE-OUT FAILS IN THESE SECURITIES, AS REQUIRED BY RULE 204(A) OF REGULATION SHO. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $70,000.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO TRANSMIT 548,669,414 REPORTABLE ORDER EVENTS (ROES) TO THE ORDER AUDIT TRAIL SYSTEM (OATS) DURING THE REVIEW PERIOD. THE FINDINGS STATED THAT THE FIRM FAILED TO DETECT A TECHNOLOGY ISSUE THAT AFFECTED ITS REPORTING SYSTEM, WHICH CAUSED THE ROES GENERATED BY ONE OF ITS SPONSORED ACCESS CLIENTS NOT TO BE TRANSMITTED TO OATS. THE FIRM FAILED TO ENFORCE ITS WRITTEN SUPERVISORY PROCEDURES WHICH SPECIFIED THAT THE FIRM WOULD REVIEW ITS OATS WEB INTERFACE REPORTS AND DATA TO ENSURE THAT ALL ROES WERE BEING SUBMITTED TO OATS. BASED ON THE VOLUME OF NON-REPORTING AND THE EXTENDED PERIOD OVER WHICH IT OCCURRED, THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE SECURITIES LAWS AND REGULATIONS, AND FINRA RULES REGARDING OATS. THE FINDINGS ALSO STATED THAT IN 171 INSTANCES, THE FIRM ACCEPTED A SHORT SALE ORDER FROM ANOTHER PERSON, OR EFFECTED A SHORT SALE FOR ITS OWN ACCOUNT, WITHOUT FIRST BORROWING THE SECURITY, OR ENTERING INTO A BONA-FIDE ARRANGEMENT TO BORROW THE SECURITY, AND HAD A FAIL-TO-DELIVER POSITION AT A REGISTERED CLEARING AGENCY IN SUCH SECURITY THAT WAS NOT CLOSED OUT IN ACCORDANCE WITH THE REQUIREMENTS OF PARAGRAPH (A) OF SEC RULE 204. IN FOUR INSTANCES, THE FIRM EXECUTED A SHORT SALE ORDER AND FAILED TO PROPERLY MARK THE ORDER AS SHORT. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS, CONCERNING RULE 204 OF REGULATION SHO. THE FINDINGS ALSO INCLUDED THAT FOR 61 SETTLEMENT DATES, THE FIRM REPORTED 171 SHORT INTEREST POSITIONS TOTALING 4,706,076 SHARES WHEN IT SHOULD HAVE REPORTED 90 SHORT INTEREST POSITIONS TOTALING 747,865 SHARES. THE VIOLATIONS RESULTED FROM A CODING ERROR THAT CAUSED THE FIRM TO ERRONEOUSLY INCLUDE SHORT INTEREST POSITIONS FROM CERTAIN ACCOUNTS IN THE SHORT INTEREST REPORTS THE FIRM SUBMITTED TO FINRA. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND FINRA RULES, CONCERNING SHORT INTEREST POSITION REPORTING. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED A TOTAL OF $470,000, OF WHICH $400,000 IS PAYABLE TO FINRA. THE REMAINING $70,000 WILL BE PAID TO NYSE ARCA EQUITIES, INC. IN A RELATED MATTER. Summary: IN DETERMINING SANCTIONS, FINRA CONSIDERED THAT AS OF JULY 6, 2015, THE FIRM HAD TERMINATED THE SPONSORED ACCESS BUSINESS THAT RESULTED IN THE OATS VIOLATIONS CITED HEREIN. IN UNRELATED FINRA MATTERS, THE FIRM RETAINED AN INDEPENDENT CONSULTANT AND REVISED ITS WRITTEN SUPERVISORY PROCEDURES RELATED TO OATS AS OF SEPTEMBER 2016 AND HAD REVISED ITS REGULATION SHO WRITTEN SUPERVISORY PROCEDURES AS OF MARCH 10, 2015. THUS, THE SANCTIONS IN THIS MATTER DO NOT INCLUDE AN UNDERTAKING BECAUSE OF THIS CONDUCT.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO IMPLEMENT ADEQUATE WRITTEN PROCEDURES AND SUPERVISORY SYSTEMS AND CONTROLS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH NYSE RULE 123C WITH RESPECT TO CERTAIN OF THE FIRM'S PROPRIETARY TRADING UNITS. THE FINDINGS STATED THAT THE FIRM FAILED TO COMPLY WITH THE REQUIREMENTS GOVERNING THE CANCELLATION OF MARKET-ON-CLOSE/LIMIT-ON-CLOSE (MOC/LOC) AND CLOSING OFFSET (CO) ORDERS WHEN FIRM TRADERS CANCELLED THREE MOC/LOC OR CO ORDERS BETWEEN 3:45 P.M. AND 3:58 P.M. THAT WERE NOT THE RESULT OF LEGITIMATE ORDER ERRORS. IN ADDITION, THE FIRM FAILED TO PROVIDE COMPLETE AND/OR ACCURATE INFORMATION IN RESPONSE TO REQUESTS BY NYSE REGULATION. SPECIFICALLY, THE FIRM PROVIDED INCOMPLETE, INCORRECT AND/OR MISLEADING INFORMATION ON MATERIAL ISSUES TO THIS MATTER, INCLUDING ITS RELATIONSHIP TO CERTAIN CLIENTS AND ITS RELATED SUPERVISORY SYSTEMS. THE FIRM ALSO PROVIDED AN EXPLANATION OF HOW OTHER CANCELLATIONS WERE ENTERED ON THE NYSE THAT WAS LATER DETERMINED TO NOT BE COMPLETE AND/OR ACCURATE. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $30,000. Summary: THE FIRM WAS CENSURED AND FINED $30,000.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO IMPLEMENT POLICIES AND PROCEDURES TO REASONABLY AVOID DISPLAYING, OR ENGAGING IN A PATTERN OR PRACTICE OF DISPLAYING, ANY QUOTATIONS THAT LOCKED OR CROSSED A PROTECTED QUOTATION, AND ANY MANUAL QUOTATIONS THAT LOCKED OR CROSSED A QUOTATION PREVIOUSLY DISSEMINATED PURSUANT TO AN EFFECTIVE NATIONAL MARKET SYSTEM PLAN. THE FINDINGS STATED THAT THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS AND BZX RULES CONCERNING LOCKING OR CROSSING PROTECTED QUOTATIONS. SPECIFICALLY, WITH RESPECT TO ITS DIRECT MARKET ACCESS CLIENTS, THE FIRM'S SYSTEM DID NOT INCLUDE WRITTEN SUPERVISORY PROCEDURES PROVIDING FOR THE FOLLOWING: (1) THE IDENTIFICATION OF THE PERSONS RESPONSIBLE FOR SUPERVISION WITH RESPECT TO THE APPLICABLE RULES; (2) A STATEMENT OF THE SUPERVISORY STEPS TO BE TAKEN BY THE PERSONS IDENTIFIED AS RESPONSIBLE FOR ENSURING COMPLIANCE WITH THE APPLICABLE RULES; (3) A STATEMENT OF THE FREQUENCY WITH WHICH SUCH PERSON SHOULD TAKE SUCH STEPS; AND (4) A STATEMENT AS TO HOW THE COMPLETION OF THE STEPS INCLUDED IN THE WRITTEN SUPERVISORY PROCEDURES SHOULD BE DOCUMENTED. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $5,000. IF THIS SETTLEMENT IS MADE PURSUANT TO BZX RULE 8.8, THE DECISION IN THIS MATTER IS FINAL 20 BUSINESS DAYS AFTER THE ISSUANCE OF THE DECISION. THEREFORE, THIS AWC BECAME FINAL APRIL 10, 2018.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE WRITTEN POLICIES AND PROCEDURES THAT WERE REASONABLY DESIGNED TO PREVENT TRADE-THROUGHS OF PROTECTED QUOTATIONS IN NATIONAL MARKET SYSTEM (NMS) STOCKS THAT DID NOT FALL WITHIN ANY APPLICABLE EXCEPTION, AND IF RELYING ON AN EXCEPTION, WERE REASONABLY DESIGNED TO ASSURE COMPLIANCE WITH THE TERMS OF THE EXCEPTION. THE FINDINGS STATED THAT THE FIRM INACCURATELY APPENDED PRINT PROTECTION MODIFIERS TO TRANSACTION REPORTS SUBMITTED TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) IDENTIFYING THE TRANSACTIONS AS QUALIFYING FOR AN EXCEPTION OR EXEMPTION FROM SEC RULE 611 OF REGULATION NMS. THE FINDINGS ALSO STATED THAT FOR STOPPED ORDERS THAT THE FIRM PURPORTEDLY HAD EXECUTED PURSUANT TO SEC RULE 611(B)(9), IT FAILED TO DOCUMENT ON AN ORDER-BY-ORDER BASIS THE SPECIFIED PRICE AGREED TO BY THE CUSTOMER AND THE TIME AT WHICH THE STOP PRICE WAS DETERMINED. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $40,000, AND REQUIRED TO REVISE ITS WSPS.

Allegations: ON APRIL 12, 2018, THE CME CLEARING HOUSE RISK COMMITTEE REVIEWED THE FIRM'S RISK BASED EXAMINATION REPORT DATED MARCH 9, 2018 AND CHARGED THE FIRM WITH VIOLATING CBOT RULES 951., 970.A., 971.A., 971.A.1. AND 980.B. Status: Final Sanction Detail: THE FINE OF $250000 WAS PAID.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO MAINTAIN A CONTINUOUS TWO-SIDED TRADING INTEREST DURING REGULAR MARKET HOURS, AT PRICES WITHIN CERTAIN PERCENTAGES AWAY FROM THE NATIONAL BEST BID OR OFFER ("NBBO"). THE FINDINGS STATED THAT THIS RESULTED FROM THE FIRM FAILING TO PROPERLY SUBMIT A MARKET MAKER PEG ORDER FOR A SECURITY IN WHICH THE FIRM MADE A MARKET. THE FINDINGS ALSO STATED THAT THE FIRM'S SUPERVISORY SYSTEM WAS NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH NASDAQ QUOTING OBLIGATIONS. SPECIFICALLY, THE FIRM'S WRITTEN SUPERVISORY PROCEDURES FAILED TO STATE, WHICH REPORTS THE DESIGNATED SUPERVISOR(S) REVIEW FOR QUOTING OBLIGATIONS AND FAILED TO ESTABLISH A PROCEDURE TO REVIEW THE FIRM'S ENTIRE QUOTING OBLIGATION ON A GIVEN DAY. RATHER, THE FIRM ONLY REVIEWED THE FIRM'S ACTUAL QUOTES, THUS IT DID NOT REVIEW SECURITIES IN WHICH IT HAD A QUOTATION OBLIGATION BUT FAILED TO PROPERLY QUOTE. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $15,000, AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES (WSPS).

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT MISREPORTED ITS SHORT POSITIONS IN EQUITY SECURITIES THAT MUST BE REPORTED PURSUANT TO FINRA RULE 4560. THE FINDINGS STATED THAT THE FIRM REPORTED A TOTAL OF 1,911 SHORT POSITIONS TOTALING 23,640,682 SHARES BUT SHOULD HAVE REPORTED ONLY 1,704 SHORT POSITIONS TOTALING 21,157,936 SHARES. THUS, IT OVERSTATED ITS SHORT POSITIONS BY A TOTAL OF 2,482,746 SHARES AND OVERSTATED THE NUMBER OF ACCOUNTS WITH SHORT POSITIONS BY 207. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $90,000. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT MISREPORTED ITS SHORT POSITIONS IN EQUITY SECURITIES THAT MUST BE REPORTED PURSUANT TO FINRA RULE 4560. THE FINDINGS STATED THAT THE FIRM OVERSTATED ITS SHORT POSITIONS AND OVERSTATED THE NUMBER OF ACCOUNTS WITH SHORT POSITIONS.

Allegations: DUE TO SYSTEM ISSUES THAT AROSE DURING ITS TRANSITION BETWEEN THIRD-PARTY ORDER MANAGEMENT SYSTEMS, THE FIRM FAILED TO TRANSMIT ROES TO OATS. THE FINDINGS STATED THAT DUE TO THE SAME SYSTEM ISSUES, THE FIRM TRANSMITTED ROES CONTAINING INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA TO OATS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $30,000. FINE PAID IN FULL ON 2/19/20. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT DUE TO SYSTEM ISSUES THAT AROSE DURING ITS TRANSITION BETWEEN THIRD-PARTY ORDER MANAGEMENT SYSTEMS, THE FIRM FAILED TO TRANSMIT ROES TO OATS. THE FINDINGS STATED THAT DUE TO THE SAME SYSTEM ISSUES, THE FIRM TRANSMITTED ROES CONTAINING INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA TO OATS.

Allegations: ALLEGED VIOLATION OF FINRA BY-LAWS, ARTICLE V, SECTION 2(C) AND SECTION 3(B), FINRA RULE 2010, FINRA INCORPORATED NYSE RULES 351(A) AND 351(D), NASD BY-LAWS, ARTICLE V, SECTION 2(C) AND SECTION 3(B), NASD RULES 2110, 3010, 3070(C): DURING THE RELEVANT PERIOD, THE FIRM WAS A MEMBER OF NYSE AND REQUIRED TO FILE FORM RE-3 WITHIN 30 DAYS OF A REPORTABLE EVENT PURSUANT TO NYSE RULE 351(A). FINRA ALLEGES THE FIRM FAILED TO FILE FORMS RE-3, LATE FILED FORMS RE-3 AND FILED INACCURATE FORMS RE-3 IN CONNECTION WITH 26 SETTLEMENTS AND ARBITRATION AWARDS. FINRA ALLEGES THE FIRM ALSO FAILED TO FILED FORMS U-4 AND FORMS U-5, LATE FILED FORMS U-4 AND FORMS U-5, AND FILED FORMS U-4 AND FORMS U-5 THAT CONTAINED INACCURATE FACTS IN CONNECTION WITH DISCLOSABLE EVENTS. FINRA ALLEGES THE FIRM FAILED TO REPORT A CUSTOMER COMPLAINT, UNTIMELY REPORTED CUSTOMER COMPLAINTS, AND MADE INACCURATE STATEMENTS IN CONNECTION WITH A CUSTOMER COMPLAINT. THE FIRM HAD WRITTEN SUPERVISORY PROCEDURES DESIGNED TO ENSURE COMPLIANCE WITH THE REQUIREMENTS OF NASD RULE 3070, NYSE RULE 351(A) AND (D), AND THE NASD BY-LAWS. HOWEVER, THE WRITTEN PROCEDURES WERE NOT SUFFICIENTLY IMPLEMENTED IN ORDER FOR THE FIRM TO COMPLY WITH APPLICABLE REGULATORY REPORTING REQUIREMENTS. SPECIFICALLY, THE FIRM ALLEGEDLY FAILED TO REPORT APPROXIMATELY 91 DISCLOSABLE EVENTS. IN ADDITION, THE FIRM ALLEGEDLY FILED FORMS RE-3, FORMS U-4, FORMS U-5, AND 3070 REPORTS THAT CONTAINED INACCURATE STATEMENTS IN CONNECTION WITH DISCLOSABLE EVENTS DESPITE ITS OBLIGATION TO TIMELY AND ACCURATELY REPORT THE DISCLOSABLE EVENTS, AND DESPITE HAVING BEEN REPEATEDLY ADVISED BY ITS REGULATORS OF THE FIRM'S FAILURE TO COMPLY WITH ITS REPORTING REQUIREMENTS. THE FIRM ALLEGEDLY FAILED TO ENSURE THAT ITS PROCEDURES FOR REPORTING CUSTOMER COMPLAINTS, SETTLEMENTS AND OTHER DISCLOSABLE EVENTS TO THE FIRM'S BUSINESS CONDUCT DEPARTMENT WERE BEING FOLLOWED. THE FIRM ALSO ALLEGEDLY FAILED TO ENSURE THAT THE FIRM'S BUSINESS CONDUCT DEPARTMENT WAS PROPERLY MONITORING CRD FOR DISCLOSABLE EVENTS FOR CURRENT AND FORMER REGISTERED EMPLOYEES. FINALLY, THE FIRM ALLEGEDLY DILFAILED TO FOLLOW-UP TO DETERMINE THAT ANY RESPONSIBILITY TO SUPERVISE DELEGATED TO COMPLIANCE OFFICERS, BRANCH MANAGERS AND OTHER PERSONNEL WAS BEING DILIGENTLY EXERCISED. DILATORY FILINGS ALLEGEDLY CONTINUED EVEN AFTER THE SIGNING OF AN AWC IN 2007, THE RECEIPT OF A WELLS NOTICE IN 2008, AND THE RECEIPT OF A CAUTIONARY ACTION LETTER IN 2009 RELATED TO REGULATORY FILINGS. DESPITE SUCH NOTICES, IT IS ALLEGED THE FIRM FAILED TO FOLLOW UP AND ENSURE THAT THE PROCEDURES IT HAD IN PLACE TO COMPLY WITH APPLICABLE REPORTING REQUIREMENTS WERE BEING DILIGENTLY FOLLOWED. IT IS ALLEGED THE PROCEDURES WERE NOT BEING FOLLOWED, AS EVIDENCED BY THE CONTINUED VIOLATIONS. Status: Final Sanction Detail: EXTENDED HEARING PANEL DECISION RENDERED AUGUST 2, 2012 WHEREIN THE FIRM IS FINED A TOTAL OF $300,000 AND SHALL PAY $14,930.95 IN COSTS, JOINTLY AND SEVERALLY. THE SANCTIONS WERE BASED ON FINDINGS THAT FIRM HAD TO REPORTING FAILURES WITH RESPECT TO FORMS U4 AND U5, NYSE FORMS RE-3, AND NASD RULE 3070, AND FAILED TO SUPERVISE ITS REGISTRATION REPORTING. APPEALED TO THE NAC ON AUGUST 3, 2012. NAC DECISION RENDERED DECEMBER 11, 2014 WHEREIN THE NAC AFFIRMED THE FINDINGS AND THE SANCTIONS IMPOSED AGAINST THE FIRM. THE NAC ALSO ORDERED THAT THE FIRM PAY APPEAL COSTS IN THE AMOUNT OF $1,591.78, JOINTLY AND SEVERALLY. THIS MATTER HAS BEEN APPEALED TO THE SEC AND THE SANCTIONS ARE NOT IN EFFECT PENDING REVIEW. SEC DECISION RENDERED AUGUST 12, 2016 SUSTAINING THE NAC DECISION. ON OCTOBER 11, 2016, THE FIRM APPEALED THE DECISION TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. THE SANCTIONS ARE NOT IN EFFECT PENDING THE REVIEW. U.S. COURT OF APPEALS DECISION RENDERED APRIL 20, 2018 WHICH DENIED THE FIRM'S PETITION FOR REVIEW. THE DECISION BECAME FINAL ON JULY 19, 2018. Summary: EXTENDED HEARING PANEL DECISION RENDERED AUGUST 2, 2012 WHEREIN THE FIRM IS FINED A TOTAL OF $300,000 AND SHALL PAY $14,930.95 IN COSTS, JOINTLY AND SEVERALLY. THE SANCTIONS WERE BASED ON FINDINGS THAT FIRM HAD TO REPORTING FAILURES WITH RESPECT TO FORMS U4 AND U5, NYSE FORMS RE-3, AND NASD RULE 3070, AND FAILED TO SUPERVISE ITS REGISTRATION REPORTING. APPEALED TO THE NAC ON AUGUST 3, 2012. NAC DECISION RENDERED DECEMBER 11, 2014 WHEREIN THE NAC AFFIRMED THE FINDINGS AND THE SANCTIONS IMPOSED AGAINST THE FIRM. THE NAC ALSO ORDERED THAT THE FIRM PAY APPEAL COSTS IN THE AMOUNT OF $1,591.78, JOINTLY AND SEVERALLY. THIS MATTER HAS BEEN APPEALED TO THE SEC AND THE SANCTIONS ARE NOT IN EFFECT PENDING REVIEW. SEC DECISION RENDERED AUGUST 12, 2016 SUSTAINING THE NAC DECISION. ON OCTOBER 11, 2016, THE FIRM APPEALED THE DECISION TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. THE SANCTIONS ARE NOT IN EFFECT PENDING THE REVIEW. U.S. COURT OF APPEALS DECISION RENDERED APRIL 20, 2018 WHICH DENIED THE FIRM'S PETITION FOR REVIEW. THE DECISION BECAME FINAL ON JULY 19, 2018.

Allegations: BROKER DEALER OPERATED A BRANCH OFFICE IN NEVADA WITHOUT FIRST REGISTERING IT Status: Final Sanction Detail: FINES PAID 8/5/2011 Summary: FIRM WAS NOT AWARE THAT NEVADA DID NOT PERMIT UNREGISTERED HOME OFFICES WHICH ARE PERMITTED UNDER FINRA AND NYSE RULES

Allegations: AN INSPECTION OF RESPONDENT'S RECORDS WAS INITIATED BECAUSE IN JULY 2016, ONE OF RESPONDENT'S SALES REPRESENTATIVES MOVED FROM CALIFORNIA TO NEVADA AND APPEARED TO TRANSACT SECURITIES-RELATED BUSINESS FROM HIS RESIDENCE PRIOR TO OBTAINING A LICENSE FOR THIS BRANCH OFFICE. IT WAS DETERMINED THAT RESPONDENT MAINTAINED AN UNLICENSED BRANCH OFFICE IN VIOLATION OF NRS 90.360(2) AND NAC 90.392 Status: Final Sanction Detail: CIVIL PENALTY AND INSPECTION FEE PAID ON 09/19/2017. Summary: AT ALL TIMES, THE FIRM PROPERLY REGISTERED THE BRANCH OFFICE BY FILING FORM BR WITH THE STATE OF NEVADA. THE FIRM, HOWEVER, DID NOT TIMELY FILE WITH THE STATE OF NEVADA AS A FOREIGN CORPORATION PURSUANT TO NRS 80.010 WHICH EFFECTIVELY RENDERED THE BRANCH OFFICE AS DEFICIENT.

Allegations: WEDBUSH WAS ALLEDGED TO FAIL TO PROVIDE THE BUREAU WITH DOCUMENTS IN ORDER TO REVIEW THE AGENT APPLICATION OF AN INDIVIDUAL WHO WAS PREVIOUSLY A REGISTERED REPRESENTATIVE OF THE FIRM. WEDBUSH FAILED TO RESPOND TO SUBSEQUENT REQUESTS AND A SUMMARY ORDER WAS SENT. Status: Final Sanction Detail: WEDBUSH WAS FINED $20,000 AND PROVIDED THE MISSING DOCUMENTS. Summary: WEDBUSH SIGNED THE CONSENT ORDER 3/25/2010 AND THE BUREAU SIGNED IT ON 3/31/2010.

Allegations: WEDBUSH SECURITIES IN JANUARY 1986 THROUGH JUNE 1987 CLEARED TRADES FOR CORRESPONDENT BROKER-DEALERS TENNESSEE CLIENTS WITHOUT BEING REGISTERED AS A BROKER-DEALER IN THE STATE AS REQUIRED BY TENNESSEE COMP. R. & REGS. 0780-4-3.01(1)(E). Status: Final Sanction Detail: WEDBUSH SECURITIES WAS FINED $30,000 AND AGREED TO A PERIOD OF PROBATION FOR TWO YEARS. Summary: WEDBUSH SECURITIES WAS FINED $30,000 AND AGREED TO A PERIOD OF PROBATION FOR TWO YEARS.

Allegations: WEDBUSH SECURITIES IN JANUARY 1986 THROUGH JUNE 1987 CLEARED TRADES FOR CORRESPONDENT BROKER-DEALERS TENNESSEE CLIENTS WITHOUT BEING REGISTERED AS A BROKER-DEALER IN THE STATE AS REQUIRED BY TENNESSEE COMP. R. & REGS. 0780-4-3.01(1)(E). Status: Final Sanction Detail: WEDBUSH SECURITIES WAS FINED $30,000 AND AGREED TO A PERIOD OF PROBATION FOR TWO YEARS. Summary: WEDBUSH SECURITIES WAS FINED $30,000 AND AGREED TO A PERIOD OF PROBATION FOR TWO YEARS.

Allegations: SEC ADMIN RELEASES 33-10650, 34-86133 / JUNE 18, 2019: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED AGAINST WEDBUSH SECURITIES, INC., ("WEDBUSH" OR "RESPONDENT"). ON THE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OF WEDBUSH'S IMPROPER PRACTICES WITH RESPECT TO SECURITIES LENDING TRANSACTIONS INVOLVING PRE-RELEASED AMERICAN DEPOSITARY RECEIPTS ("ADRS"). ONLY BROKERS (OR OTHER MARKET PARTICIPANTS) THAT HAVE ENTERED INTO PRE-RELEASE AGREEMENTS WITH A DEPOSITARY ("PRE-RELEASE AGREEMENTS") CAN OBTAIN PRE-RELEASED ADRS FROM THE DEPOSITARY. THE PRE-RELEASE AGREEMENTS, CONSISTENT WITH THE DEPOSIT AGREEMENTS, REQUIRE THE BROKER RECEIVING THE PRE-RELEASED ADRS ("PRE-RELEASE BROKER"), OR ITS CUSTOMER ON WHOSE BEHALF THE PRE-RELEASE BROKER IS ACTING, TO BENEFICIALLY OWN THE ORDINARY SHARES REPRESENTED BY THE ADRS, AND TO ASSIGN ALL BENEFICIAL RIGHTS, TITLE, AND INTEREST IN THOSE ORDINARY SHARES TO THE DEPOSITARY WHILE THE PRE-RELEASE TRANSACTION IS OUTSTANDING. IN EFFECT, THE PRE-RELEASE BROKER OR ITS CUSTOMER BECOMES THE TEMPORARY CUSTODIAN OF THE ORDINARY SHARES THAT WOULD OTHERWISE HAVE BEEN DELIVERED TO THE CUSTODIAN. FROM AT LEAST NOVEMBER 2011 UNTIL APPROXIMATELY SEPTEMBER 2013, WEDBUSH WAS A PRE-RELEASE BROKER THAT OBTAINED PRE-RELEASED ADRS DIRECTLY FROM FOUR DEPOSITARIES PURSUANT TO PRE-RELEASE AGREEMENTS. CONTRARY TO CERTAIN PROVISIONS IN THE PRE-RELEASE AGREEMENTS AND THE DEPOSIT AGREEMENTS, ASSOCIATED PERSONS ON WEDBUSH'S SECURITIES LENDING DESK REGULARLY OBTAINED PRE-RELEASED ADRS FROM DEPOSITARIES AND LOANED THEM TO COUNTERPARTIES WITHOUT TAKING REASONABLE STEPS TO DETERMINE WHETHER THE REQUISITE NUMBER OF ORDINARY SHARES WAS OWNED AND CUSTODIED BY WEDBUSH OR ITS COUNTERPARTIES. THE RESULT OF THIS CONDUCT WAS THE ISSUANCE OF ADRS THAT IN MANY INSTANCES WERE NOT BACKED BY ORDINARY SHARES AS REQUIRED BY THE DEPOSIT AGREEMENTS. THIS CONDUCT VIOLATED SECTION 17(A)(3) OF THE SECURITIES ACT. IN ADDITION, WEDBUSH FAILED TO ESTABLISH AND IMPLEMENT EFFECTIVE POLICIES AND PROCEDURES TO ADDRESS WHETHER WEDBUSH'S ASSOCIATED PERSONS COMPLIED WITH THE FIRM'S OBLIGATIONS IN CONNECTION WITH PRE-RELEASE TRANSACTIONS, SUCH AS DETERMINING OWNERSHIP OF THE UNDERLYING ORDINARY SHARES. AS A RESULT, WEDBUSH'S SUPERVISORY POLICIES AND PROCEDURES WERE NOT REASONABLY DESIGNED AND IMPLEMENTED TO PROVIDE EFFECTIVE OVERSIGHT OF ASSOCIATED PERSONS TO PREVENT AND DETECT THEIR VIOLATIONS OF SECURITIES ACT SECTION 17(A)(3), AND WEDBUSH FAILED REASONABLY TO SUPERVISE ITS ASSOCIATED PERSONS WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT. AS RESULT OF THE CONDUCT, RESPONDENT VIOLATED SECTION 17(A)(3) OF THE SECURITIES ACT. WEDBUSH WAS RESPONSIBLE FOR SUPERVISING ITS SECURITIES LENDING DESK PERSONNEL TO ADDRESS WHETHER THEY WERE BORROWING AND LENDING PRE-RELEASED ADRS THAT WERE NOT BACKED BY UNDERLYING ORDINARY SHARES. WEDBUSH FAILED REASONABLY TO FULFILL SUCH SUPERVISORY RESPONSIBILITIES WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT. IN DETERMINING TO ACCEPT THE OFFER, THE COMMISSION CONSIDERED THE COOPERATION AFFORDED THE COMMISSION AND ITS VOLUNTARY REMEDIATION EFFORTS IN DISCONTINUING PRE-RELEASE ACTIVITY BEFORE THE START OF THE S COMMISSION'S INVESTIGATION. Status: Final Sanction Detail: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE OFFER) WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN THE RESPONDENT'S OFFER. ACCORDINGLY, IT IS HEREBY ORDERED THAT RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 17(A)(3) OF THE SECURITIES ACT. RESPONDENT IS CENSURED. RESPONDENT SHALL PAY DISGORGEMENT OF $4,869,072 AND PREJUDGMENT INTEREST OF $805,641. RESPONDENT SHALL PAY A CIVIL MONEY PENALTY OF $2,434,536.

Allegations: THE COMMODITY FUTURES TRADING COMMISSION (THE "COMMISSION") ALLEGED THAT FROM AT LEAST 2018 TO THE PRESENT (THE "RELEVANT PERIOD"), APPLICANT VIOLATED SECTION 4G OF THE COMMODITY EXCHANGE ACT ("ACT"), 7 U.S.C. § 6G, AND COMMISSION REGULATIONS ("REGULATIONS") 1.31, 1.35, AND 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022). THE COMMISSION ALLEGED THE FOLLOWING: WEDBUSH EMPLOYEES, INCLUDING THOSE AT SENIOR LEVELS, COMMUNICATED BOTH INTERNALLY AND EXTERNALLY USING PERSONAL TEXT MESSAGES. THESE WRITTEN COMMUNICATIONS WERE SENT AND RECEIVED BY WEDBUSH EMPLOYEES AND INCLUDED MESSAGES RELATED TO WEDBUSH'S BUSINESS AS A COMMISSION REGISTRANT THAT WERE REQUIRED TO BE MAINTAINED UNDER COMMISSION-MANDATED RECORDKEEPING REQUIREMENTS. THESE WRITTEN BUSINESS-RELATED COMMUNICATIONS VIA UNAPPROVED METHODS GENERALLY WERE NOT MAINTAINED AND PRESERVED BY WEDBUSH, AND WEDBUSH GENERALLY WOULD NOT HAVE BEEN ABLE TO FURNISH THE COMMUNICATIONS PROMPTLY TO A COMMISSION REPRESENTATIVE IF AND WHEN REQUESTED. IN ADDITION, THE WIDESPREAD USE OF UNAUTHORIZED COMMUNICATION METHODS BY WEDBUSH'S EMPLOYEES TO CONDUCT FIRM BUSINESS VIOLATED WEDBUSH'S OWN POLICIES AND PROCEDURES, WHICH PROHIBITED SUCH COMMUNICATIONS. WEDBUSH DID NOT MAINTAIN ADEQUATE INTERNAL CONTROLS WITH RESPECT TO THE USE OF UNAPPROVED COMMUNICATION METHODS FOR BUSINESS-RELATED COMMUNICATIONS. BECAUSE WEDBUSH FAILED TO IMPLEMENT A DILIGENT SUPERVISORY SYSTEM TO ENSURE COMPLIANCE WITH COMMISSION RECORDKEEPING REQUIREMENTS AND THE FIRM'S OWN POLICIES AND PROCEDURES, AND BECAUSE THE WIDESPREAD USE OF UNAUTHORIZED COMMUNICATION METHODS RESULTED IN THE FIRM'S FAILURE TO MAINTAIN COMMISSION-REQUIRED RECORDS, WEDBUSH FAILED TO DILIGENTLY SUPERVISE MATTERS RELATED TO ITS BUSINESS AS A COMMISSION REGISTRANT IN VIOLATION OF REGULATION 166.3, 17 C.F.R. § 166.3 (2022). Status: Final Sanction Detail: THE FIRM SHALL CEASE AND DESIST FROM VIOLATING SECTION 4G OF THE ACT, 7 U.S.C. § 6G, AND REGULATIONS 1.31, 1.35, AND 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022), PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF $6,000,000, AND SHALL COMPLY WITH THE CONDITIONS AND UNDERTAKINGS SET FORTH IN THE OFFER. Summary: APPLICANT ENTERED INTO A SETTLEMENT WITH THE CFTC, BY WHICH THE FIRM WAS ORDERED TO: CEASE AND DESIST FROM VIOLATING SECTION 4G OF THE ACT, 7 U.S.C. § 6G, AND REGULATIONS 1.31, 1.35, AND 166.3, 17 C.F.R. §§ 1.31, 1.35, 166.3 (2022); PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF $6,000,000; AND COMPLY WITH THE CONDITIONS AND UNDERTAKINGS SET FORTH IN THE ORDER.

Allegations: THE SEC ALLEGED THAT WEDBUSH FAILED TO ADHERE TO CERTAIN RECORDKEEPING REQUIREMENTS AND WEDBUSH'S OWN POLICIES. USING THEIR PERSONAL DEVICES, EMPLOYEES COMMUNICATED BOTH INTERNALLY AND EXTERNALLY BY PERSONAL TEXT MESSAGES, OR OTHER TEXT MESSAGING PLATFORMS SUCH AS WHATSAPP ("OFF-CHANNEL COMMUNICATIONS"). FROM AT LEAST JANUARY 2019, WEDBUSH EMPLOYEES SENT AND RECEIVED OFF-CHANNEL COMMUNICATIONS THAT RELATED TO THE BUSINESS OF THE BROKER-DEALER AND REGISTERED INVESTMENT ADVISER OPERATED BY WEDBUSH. RESPONDENT DID NOT MAINTAIN OR PRESERVE THE SUBSTANTIAL MAJORITY OF THESE WRITTEN COMMUNICATIONS. RESPONDENT'S FAILURE WAS FIRM-WIDE, AND INVOLVED EMPLOYEES AT ALL LEVELS OF AUTHORITY. WEDBUSH'S SUPERVISORS, WHO WERE RESPONSIBLE FOR SUPERVISING JUNIOR EMPLOYEES, ROUTINELY COMMUNICATED OFF-CHANNEL USING THEIR PERSONAL DEVICES. WEDBUSH'S WIDESPREAD FAILURE TO IMPLEMENT ITS POLICIES AND PROCEDURES THAT PROHIBIT SUCH COMMUNICATIONS LED TO ITS FAILURE TO REASONABLY SUPERVISE ITS EMPLOYEES WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT AND SECTION 203(E)(6) OF THE ADVISERS ACT. DURING THE TIME PERIOD THAT WEDBUSH FAILED TO MAINTAIN AND PRESERVE OFF-CHANNEL COMMUNICATIONS, WEDBUSH RECEIVED AND RESPONDED TO COMMISSION SUBPOENAS FOR DOCUMENTS AND RECORDS REQUESTS IN NUMEROUS COMMISSION INVESTIGATIONS. AS A RESULT, WEDBUSH'S RECORDKEEPING FAILURES LIKELY IMPACTED THE COMMISSION'S ABILITY TO CARRY OUT ITS REGULATORY FUNCTIONS AND INVESTIGATE VIOLATIONS OF THE FEDERAL SECURITIES LAWS ACROSS THESE INVESTIGATIONS. COMMISSION STAFF UNCOVERED WEDBUSH'S MISCONDUCT AFTER COMMENCING A RISK BASED INITIATIVE TO INVESTIGATE THE USE OF OFF-CHANNEL AND UNPRESERVED COMMUNICATIONS AT BROKER DEALERS. WEDBUSH HAS INITIATED A REVIEW OF ITS RECORDKEEPING FAILURES AND BEGUN A PROGRAM OF REMEDIATION. WEDBUSH WILL RETAIN AN INDEPENDENT COMPLIANCE CONSULTANT TO REVIEW AND ASSESS WEDBUSH'S REMEDIAL STEPS RELATING TO WEDBUSH'S RECORDKEEPING PRACTICES, POLICIES AND PROCEDURES, RELATED SUPERVISORY PRACTICES, AND EMPLOYMENT ACTIONS. Status: Final Sanction Detail: THE FIRM IS ORDERED TO CEASE AND DESIST; IS CENSURED; SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE ORDER; ANDSHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $10,000,000 TO THE SEC. Summary: APPLICANT ENETERED INTO A SETTLEMENT WITH THE SEC IN WHICH IT ADMITTED TO FINDINGS THAT IT: WILLFULLY VIOLATED SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER; WILLFULLY VIOLATED SECTION 204 OF THE ADVISERS ACT AND RULE 2042(A)(7) THEREUNDER; FAILED REASONABLY TO SUPERVISE ITS EMPLOYEES WITH A VIEW TO PREVENTING OR DETECTING CERTAIN OF ITS EMPLOYEES' AIDING AND ABETTING VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER, WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT; AND FAILED REASONABLY TO SUPERVISE ITS EMPLOYEES WITH A VIEW TO PREVENTING OR DETECTING CERTAIN OF ITS EMPLOYEES' AIDING AND ABETTING VIOLATIONS OF SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER, WITHIN THE MEANING OF SECTION 203(E)(6) OF THE ADVISERS ACT. PURSUANT TO THE SETTLEMENT, APPLICANT WAS: ORDERED TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4 THEREUNDER, AND CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 204 OF THE ADVISERS ACT AND RULE 204-2 THEREUNDER; CENSURED; ORDERED TO COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE ORDER; AND FINED A CIVIL MONEY PENALTY IN THE AMOUNT OF $10,000,000.

Allegations: THE SEC ALLEGES THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE EXCHANGE ACT AND RULE 15C3-5 THEREUNDER BECAUSE IT DID NOT MAINTAIN EXCLUSIVE CONTROL OVER RISK MANAGEMENT CONTROLS IN SPONSORED ACCESS TRADING PLATFORMS; DID NOT HAVE A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES THAT WAS REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH ALL REGULATORY REQUIREMENTS, INCLUDING THOSE THAT MUST BE SATISFIED ON A PRE-ORDER ENTRY BASIS; DID NOT HAVE CONTROLS AND PROCEDURES REASONABLY DESIGNED TO RESTRICT ACCESS TO MARKET ACCESS TRADING SYSTEMS TO PERSONS AND ACCOUNTS PRE-APPROVED AND AUTHORIZED BY THE FIRM; DID NOT ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM FOR REGULARLY REVIEWING THE EFFECTIVENESS OF ITS RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES RELATING TO MARKET ACCESS; AND DID NOT CONDUCT AN ADEQUATE REVIEW OF ITS MARKET ACCESS CONTROLS AND PROCEDURES. THE FIRM WILLFULLY VIOLATED SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-8 THEREUNDER BECAUSE IT FAILED TO FILE REPORTS OF SUSPICIOUS TRADING ACTIVITY IN CONNECTION WITH IS MARKET ACCESS BUSINESS. THE FIRM WILLFULLY VIOLATED SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER BECAUSE IT FAILED TO PRESERVE ORIGINALS OR COPIES OF COMMUNICATIONS CONTAINING TRADING INSTRUCTIONS RELATING TO ISOS SUBMITTED BY ITS CUSTOMERS UNDER A FIRM MPID THROUGH THIRD-PARTY TRADING PLATFORMS. THE FIRM WILLFULLY VIOLATED RULE 203(B)(1) OF REGULATION SHO BECAUSE IT ALLOWED SPONSORED ACCESS CUSTOMERS TO SUBMIT SHORT-SALE ORDERS FOR SECURITIES THAT WERE NOT EASY TO BORROW WITHOUT FIRST OTHERWISE LOCATING SHARES TO BORROW. THE FIRM WILLFULLY VIOLATED RULE 611(C) OF REGULATION NMS BECAUSE IT ALLOWED SPONSORED ACCESS CUSTOMERS TO SUBMIT ISOS WITHOUT THE FIRM TAKING REASONABLE STEPS TO ENSURE THAT IT SATISFIED THE REQUIREMENTS FOR SENDING ISOS. Status: Final Sanction Detail: ORDERED THAT: RESPONDENT WEDBUSH CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS, IS CENSURED AND SHALL, WITHIN TEN (10) DAYS OF THE ENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $2,447,043.38 TO THE SECURITIES AND EXCHANGE COMMISSION. RESPONDENT WEDBUSH SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. IN CONNECTION WITH THE CONDUCT DESCRIBED, WEDBUSH ACTED WILLFULLY. Summary: IT IS FURTHER ORDERED THAT THE ADMINISTRATIVE LAW JUDGE SHALL ISSUE AN INITIAL DECISION NO LATER THAN 300 DAYS FROM THE DATE OF SERVICE OF THIS ORDER. SEC ADMIN RELEASE 34-73652, IA RELEASE 40-3971 / NOVEMBER 20, 2014: RESPONDENT WEDBUSH HAS SUBMITTED AN OFFER OF SETTLEMENT THAT THE COMMISSION HAS DETERMINED TO ACCEPT. RESPONDENT ADMITS THE FACTS AND ACKNOWLEDGES THAT ITS CONDUCT VIOLATED THE FEDERAL SECURITIES LAWS, ADMITS THE COMMISSION'S JURISDICTION OVER IT AND THE SUBJECT MATTER OF THESE PROCEEDINGS, AND CONSENTS TO THE ENTRY OF THIS ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTIONS 15(B) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 203(E) OF THE INVESTMENT ADVISERS ACT OF 1940 AS TO WEDBUSH SECURITIES INC. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN RESPONDENT WEDBUSH'S OFFER. ACCORDINGLY, PURSUANT TO SECTIONS 15(B) AND 21C OF THE EXCHANGE ACT AND SECTION 203(E) OF THE ADVISERS ACT, IT IS HEREBY ORDERED THAT: RESPONDENT WEDBUSH CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 15(C)(3) AND 17(A) OF THE EXCHANGE ACT; RULES 15C3-5, 17A-4, AND 17A-8 THEREUNDER; RULE 203(B)(1) OF REGULATION SHO; AND RULE 611(C) OF REGULATION NMS. RESPONDENT WEDBUSH IS CENSURED. RESPONDENT WEDBUSH SHALL, WITHIN TEN (10) DAYS OF THE ENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $2,447,043.38 TO THE SECURITIES AND EXCHANGE COMMISSION. RESPONDENT WEDBUSH SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT.

Allegations: SEC ADMIN RELEASE 34-73506 / NOVEMBER 3, 2014: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B), 15B(C)(2) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AGAINST WEDBUSH SECURITIES INC. ("WEDBUSH" OR "RESPONDENT"). IN ANTICIPATION OF THE INSTITUTION OF THESE PROCEEDINGS, RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS HEREIN, EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER IT AND THE SUBJECT MATTER OF THESE PROCEEDINGS, WHICH ARE ADMITTED, RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 15(B), 15B(C)(2) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER. ON THE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THE COMMISSION FINDS THAT: THESE PROCEEDINGS INVOLVE THE SALE OF NON-INVESTMENT GRADE OR "JUNK" BONDS ISSUED BY THE COMMONWEALTH OF PUERTO RICO ("PUERTO RICO") BY WEDBUSH, A REGISTERED BROKER-DEALER AND MUNICIPAL SECURITIES DEALER, TO CUSTOMERS IN AMOUNTS BELOW THE MINIMUM DENOMINATION OF THE ISSUE. RULE G-15(F) PROMULGATED BY THE MUNICIPAL SECURITIES RULEMAKING BOARD ("MSRB") PROHIBITS DEALERS FROM EFFECTING CUSTOMER TRANSACTIONS IN MUNICIPAL SECURITIES IN AMOUNTS BELOW THE MINIMUM DENOMINATIONS OF THE ISSUES. MINIMUM DENOMINATIONS ARE GENERALLY INTENDED TO LIMIT SALES OF MUNICIPAL SECURITIES TO RETAIL CUSTOMERS FOR WHOM SUCH BONDS MAY NOT BE SUITABLE, BUT THE PROSCRIPTIONS OF RULE G-15(F) APPLY TO ALL TRANSACTIONS WITH CUSTOMERS, REGARDLESS OF WHETHER THE SECURITIES ARE SUITABLE FOR THE CUSTOMER. IN MARCH 2014, WEDBUSH VIOLATED MSRB RULE G-15(F) BY EXECUTING THREE SALES TRANSACTIONS IN THE PUERTO RICO BONDS WITH CUSTOMERS IN AMOUNTS BELOW THE $100,000 MINIMUM DENOMINATION OF THE ISSUE ESTABLISHED BY THE ISSUER, PUERTO RICO, AND SPECIFIED IN THE OFFICIAL STATEMENT. THE LIMITED EXCEPTIONS PROVIDED UNDER MSRB RULE G-15(F) FOR CUSTOMER TRANSACTIONS IN MUNICIPAL SECURITIES BELOW THE MINIMUM DENOMINATION OF AN ISSUE DID NOT APPLY TO THESE TRANSACTIONS. RESPONDENT SOLICITED ALL OF THE CUSTOMER SALES TRANSACTIONS. AS A RESULT OF THE CONDUCT DESCRIBED ABOVE, RESPONDENT WILLFULLY VIOLATED MSRB RULE G-15(F). AS A RESULT OF RESPONDENT'S WILLFUL VIOLATIONS OF MSRB RULE G-15(F), RESPONDENT WILLFULLY VIOLATED SECTION 15B(C)(1) OF THE EXCHANGE ACT. Status: Final Sanction Detail: ACCORDINGLY, IT IS HEREBY ORDERED THAT: RESPONDENT CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 15B(C)(1) OF THE EXCHANGE ACT AND MSRB RULE G-15(F) . RESPONDENT IS CENSURED. RESPONDENT SHALL, WITHIN SEVEN (7) DAYS OF THE ENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $67,200. RESPONDENT WILLFULLY VIOLATED MSRB RULE G-15(F). AS A RESULT OF RESPONDENT'S WILLFUL VIOLATIONS OF MSRB RULE G-15(F), RESPONDENT WILLFULLY VIOLATED SECTION 15B(C)(1) OF THE EXCHANGE ACT. Summary: IN DETERMINING TO ACCEPT THE OFFER, THE COMMISSION CONSIDERED REMEDIAL ACTS PROMPTLY UNDERTAKEN BY RESPONDENT. AFTER IT BECAME AWARE THAT IT HAD EFFECTED CUSTOMER TRANSACTIONS IN THE 2014 BONDS BELOW THE MINIMUM DENOMINATION OF THE ISSUE, RESPONDENT CANCELLED THE TRANSACTIONS. RESPONDENT WILL UNDERTAKE TO REVIEW THE ADEQUACY OF ITS EXISTING POLICIES AND PROCEDURES RELATING TO COMPLIANCE WITH MSRB RULE G-15(F). AFTER THAT REVIEW, RESPONDENT WILL MAKE SUCH CHANGES AS ARE NECESSARY TO EFFECT COMPLIANCE WITH MSRB RULE G-15(F), INCLUDING ADOPTING NEW POLICIES AND PROCEDURES OR SUPPLEMENTING EXISTING POLICIES AND PROCEDURES. RESPONDENT WILL IMPLEMENT THESE POLICIES AND PROCEDURES, AND CONDUCT TRAINING AS TO THE POLICIES AND PROCEDURES AND COMPLIANCE WITH MSRB RULE G-15(F). RESPONDENT WILL INFORM COMMISSION STAFF NO LATER THAN SIX (6) MONTHS AFTER THE ENTRY OF THIS ORDER THAT IT HAS COMPLIED WITH THE ABOVE UNDERTAKINGS.

Allegations: SEC ADMIN RELEASE 34-82630, IA RELEASE 40-4852 / FEBRUARY 5, 2018: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B), AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT"), AND SECTION 203(E) OF THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT") AGAINST WEDBUSH SECURITIES INC. ("WEDBUSH" OR "RESPONDENT"). THE COMMISSION FINDS THAT THESE PROCEEDINGS INVOLVE WEDBUSH'S VIOLATIONS OF EXCHANGE ACT RULE 15C3-3, KNOWN AS THE CUSTOMER PROTECTION RULE ("RULE"). THE CUSTOMER PROTECTION RULE REQUIRES BROKER-DEALERS TO SAFEGUARD BOTH THE CASH AND SECURITIES OF THEIR CUSTOMERS SO THAT CUSTOMER ASSETS CAN BE PROMPTLY RETURNED IF THE FIRM FAILS. IN ORDER TO DO SO, A BROKER-DEALER IS REQUIRED TO PERIODICALLY (DAILY, WEEKLY, OR MONTHLY DEPENDING ON THE FIRM) CALCULATE THE NET AMOUNT OF CASH IT OWES ITS CUSTOMERS, AND DEPOSIT THAT AMOUNT INTO A SEGREGATED BANK ACCOUNT KNOWN AS THE "RESERVE ACCOUNT." BETWEEN SEPTEMBER 2014 AND JANUARY 2015, WEDBUSH'S WEEKLY RULE 15C3-3 CALCULATIONS TO DETERMINE THE NET AMOUNT THAT SHOULD HAVE BEEN DEPOSITED INTO THE RESERVE ACCOUNT INCLUDED A SIGNIFICANT ERROR, RESULTING IN WEEKLY RESERVE ACCOUNT DEFICIENCIES RANGING FROM APPROXIMATELY $10 MILLION TO $193 MILLION OUT OF A TOTAL RESERVE ACCOUNT REQUIREMENT THAT RANGED BETWEEN $1.5 BILLION AND $1.7 BILLION. WHEN THE ERROR WAS UNCOVERED, WEDBUSH WAS REQUIRED TO IMMEDIATELY DEPOSIT AN ADDITIONAL $133 MILLION INTO ITS RESERVE ACCOUNT, WHICH CREATED A SIGNIFICANT LIQUIDITY CHALLENGE FOR WEDBUSH. WEDBUSH'S FAILURE TO PROPERLY FUND ITS RESERVE ACCOUNT ALSO CAUSED IT TO VIOLATE SECTION 17(A)(1) OF THE EXCHANGE ACT AND RULE 17A-5(A) THEREUNDER, BECAUSE IT INCLUDED INACCURATE INFORMATION IN ITS FINANCIAL AND OPERATIONAL COMBINED UNIFORM SINGLE REPORTS ("FOCUS REPORTS"). AS A RESULT OF THE CONDUCT DESCRIBED, WEDBUSH WILLFULLY VIOLATED SECTION 15(C)(3) OF THE EXCHANGE ACT AND RULE 15C3-3 THEREUNDER, WHICH REQUIRE CARRYING BROKER-DEALERS TO MAINTAIN A RESERVE OF FUNDS OR QUALIFIED SECURITIES IN AN ACCOUNT AT A BANK THAT IS AT LEAST EQUAL IN VALUE TO THE NET CASH OWED TO CUSTOMERS. WEDBUSH ALSO WILLFULLY VIOLATED SECTION 17(A)(1) OF THE EXCHANGE ACT AND RULE 17A-5(A) THEREUNDER BY FILING FOCUS REPORTS THAT CONTAINED INCORRECT INFORMATION ON THE RESERVE FORMULA BECAUSE OF THE CALCULATION ERROR. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ACCUSATIONS WEDBUSH IS CENSURED AND ORDERED TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 15(C)(3) AND 17(A)(1) OF THE EXCHANGE ACT, AND RULES 15C3-3 AND 17A-5(A) THEREUNDER. WEDBUSH IS ORDERED TO PAY DISGORGEMENT OF $275,851 ALONG WITH PREJUDGMENT INTEREST OF $28,346 AND ORDERED TO PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $1,000,000 PLUS POST-ORDER INTEREST TO THE SECURITIES AND EXCHANGE COMMISSION. WEDBUSH IS ALSO ORDERED TO COMPLY WITH CERTAIN UNDERTAKINGS. Summary: WITHOUT ADMITTING OR DENYING THE ACCUSATIONS RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. WEDBUSH WILLFULLY VIOLATED SECTIONS 15(C)(3) AND 17(A)(1) OF THE EXCHANGE ACT AND RULES 15C3-3 AND 17A-5(A) THEREUNDER. IT IS ORDERED THAT WEDBUSH IS CENSURED AND SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 15(C)(3) AND 17(A)(1) OF THE EXCHANGE ACT, AND RULES 15C3-3 AND 17A-5(A) THEREUNDER. WEDBUSH IS ORDERED TO PAY DISGORGEMENT OF $275,851 ALONG WITH PREJUDGMENT INTEREST OF $28,346 AND ORDERED TO PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $1,000,000 PLUS POST-ORDER INTEREST TO THE SECURITIES AND EXCHANGE COMMISSION. WEDBUSH IS ALSO ORDERED TO COMPLY WITH CERTAIN UNDERTAKINGS.

Allegations: SEC ADMIN RELEASE 34-82954 / MARCH 27, 2018: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B) OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AGAINST WEDBUSH SECURITIES, INC. ("WEDBUSH" OR "RESPONDENT"). THE DIVISION OF ENFORCEMENT ALLEGES THAT WEDBUSH FAILED REASONABLY TO SUPERVISE ONE OF ITS REGISTERED REPRESENTATIVES WHO ENGAGED IN MANIPULATIVE TRADING ACTIVITY OF PENNY STOCKS OVER MULTIPLE YEARS, AS DETAILED BELOW. WEDBUSH WAS AWARE OF CERTAIN ASPECTS OF THE REGISTERED REPRESENTATIVE'S ACTIVITY IN 2012 AND 2013 BUT ITS SUPERVISORY POLICIES AND IMPLEMENTATION SYSTEMS FAILED REASONABLY TO GUIDE STAFF ON HOW TO INVESTIGATE THE ACTIVITY. SPECIFICALLY, IN LATE 2012 AND EARLY 2013, THE REGISTERED REPRESENTATIVE'S SUPERVISORS: (1) REVIEWED AN EMAIL OUTLINING HER ROLE IN FRAUDULENT TRANSACTIONS INVOLVING PENNY STOCKS; (2) RECEIVED COPIES OF TWO FINRA ARBITRATIONS FILED BY HER CUSTOMERS OUTLINING SERIOUS ALLEGATIONS OF HER ROLE IN THEIR INVESTMENTS IN THE SAME PENNY STOCK ISSUERS; (3) LEARNED OF A FINRA INQUIRY INTO HER PERSONAL TRADING IN ONE OF THOSE PENNY STOCK ISSUERS; AND (4) LEARNED OF A SEPARATE FINRA INQUIRY INTO THE ALLEGATIONS UNDERLYING THE CUSTOMER ARBITRATIONS. WEDBUSH HAD NO CLEAR PROCESS FOR HOW TO HANDLE RED FLAGS OF POTENTIAL MARKET MANIPULATION. AS A RESULT OF THE CONDUCT DESCRIBED, WEDBUSH FAILED REASONABLY TO SUPERVISE AN INDIVIDUAL WITH A VIEW TO PREVENTING AND DETECTING VIOLATIONS OF SECTIONS 17(A)(1) AND (3) OF THE SECURITIES ACT, SECTIONS 9(A)(2) AND 10(B) OF THE EXCHANGE ACT AND RULE 10B-5(A) AND (C) THEREUNDER. Status: Final Sanction Detail: WEDBUSH IS CENSURED AND SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $250,000. Summary: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE TO IMPOSE THE SANCTIONS AGREED TO IN RESPONDENT'S OFFER. ACCORDINGLY, IT IS HEREBY ORDERED THAT RESPONDENT IS CENSURED AND SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $250,000. ON MAY 31, 2018, THE FORMER PRESIDENT OF WEDBUSH WAS SUCCEEDED BY TWO NEW CO-PRESIDENTS. SINCE THAT TIME, THE CO-PRESIDENTS HAVE TAKEN CERTAIN REMEDIAL MEASURES TO IMPROVE WEDBUSH'S SUPERVISION OF ITS REGISTERED REPRESENTATIVES.

Allegations: THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") ALLEGED THAT FROM JANUARY 2017 THROUGH SEPTEMBER 2018 (THE "RELEVANT PERIOD"), THE FIRM ENGAGED IN UNREGISTERED OFFERS AND SALES OF LARGE BLOCKS OF LOW-PRICED SECURITIES BY AN OFFSHORE CUSTOMER, IN VIOLATION OF SECTIONS 5(A) AND 5(C) OF THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AS NO REGISTRATION STATEMENT WAS IN EFFECT AS TO THE OFFERS AND SALES OF THE SECURITIES AT ISSUE, NO EXEMPTION FROM REGISTRATION WAS APPLICABLE, AND THE FIRM FAILED TO CONDUCT A REASONABLE INQUIRY. IN ADDITION, THE COMMISSION ALLEGED THAT WEDBUSH FAILED TO FILE SUSPICIOUS ACTIVITY REPORTS FOR CERTAIN SUSPICIOUS TRANSACTIONS THAT IT EXECUTED ON BEHALF OF ITS OFFSHORE CUSTOMER DURING THE RELEVANT PERIOD, AS REQUIRED BY SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-8 THEREUNDER, DESPITE THE PRESENCE OF CERTAIN RED FLAGS CONCERNING THE OFFSHORE CUSTOMER'S ACTIVITIES. Status: Final Sanction Detail: THE FIRM SHALL CEASE AND DESIST; IS CENSURED; SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER; AND SHALL PAY DISGORGEMENT OF $173,508.40, PREJUDGMENT INTEREST OF $34,332.16, AND A CIVIL PENALTY OF $1,000,000 TO THE SECURITIES AND EXCHANGE COMMISSION. Summary: THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") ACCEPTED AN OFFER OF SETTELMENT FROM WEDBUSH. PURSUANT TO THE SETTLEMENT OFFER, WEDBUSH DID NOT ADMIT OR DENY THE COMMISSION'S FINDINGS THAT WEDBUSH WILLFULLY VIOLATED SECTIONS 5(A) AND 5(C) OF THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND SECTION 17(A) OF THE EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"), AND RULE 17A-8 THEREUNDER. WEDBUSH WAS ORDERED TO: CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 5(A) AND 5(C) OF THE SECURITIES ACT AND SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-8 PROMULGATED THEREUNDER; WAS CENSURED; WAS ORDERED TO COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER; AND AGREED TO PAY DISGORGEMENT OF $173,508.40, PREJUDGMENT INTEREST OF $34,332.16, AND A CIVIL PENALTY OF $1,000,000 TO THE COMMISSION.

Allegations: WMS WAS ALLEGED TO BE IN VIOLATION OF NASD CONDUCT RULES 3110 AND SEC RULE 17 A-3. Status: Final Sanction Detail: WMS PAID FINE IN THE AMOUNT OF $2,500. Summary: ON 09/27/01, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, WEDBUSH SIGNED AN ACCEPTANCE AND CONSENT TO FINDINGS THAT ON A SINGLE TRADE DATE IT FAILED TO STAMP 11 MANUAL ORDERS PROMPTLY UPON RECEIPT AND AGREED TO PAY A FINE IN THE AMOUNT OF $2,500 TO NASD REG, INC.

Allegations: WEDBUSH MORGAN SECURITIES FAILED TO HONOR ITS PUBLISHED QUOTATIONS. Status: Final Sanction Detail: $15,000.00 FINED Summary: WEDBUSH MORGAN, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SUBMITTED A LETTER OF ACCEPTANCE, WAIVER,& CONSENT CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT IT FAILED ON A FEW OCCASIONS TO HONOR ITS PUBLISHED QUOTATIONS. THE FIRM WAS CENSURED,FINED $15,000, AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES RELATING TO FIRM QUOTE COMPLIANCE.

Allegations: WEDBUSH MORGAN, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SUBMITTED A LETTER OF ACCEPTANCE, WAIVER, & CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS ON A FEW OCCASIONS THAT IT WAS A PARTY TO A LOCKED OR CROSSED MARKET CONDITION PRIOR TO MARKET OPENING AND FAILED TO FILL AN INCOMING TRADE-OR-MOVE MESSAGE FOR THE FULL SIZE OF THE MESSAGE OR MOVE ITS MARKET WITHIN 30 SECONDS. Status: Final Sanction Detail: $20,000.00 FINED Summary: WEDBUSH MORGAN, WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER,&CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCASIONS THAT IT WAS A PARTY TO A LOCKED OR CROSSED MARKET CONDITION PRIOR TO MARKET OPENING AND FAILED TO FILL AN INCOMING TRADE-OR-MOVE MESSAGE FOR THE FULL SIZE OF THE MESSAGE OR MOVE ITS MARKET WITHIN 30 SECONDS. THE FIRM WAS CENSURED AND FINED $20,000.00

Allegations: WEDBUSH MORGAN,WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER,&CONSENT,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCASIONS FAILED TO DISPLAY IMMEDIATELY CUSTOMER LIMIT ORDERS IN ITS PUBLIC QUOTATION,WHEN SUCH ORDER WAS AT A PRICE WHICH WOULD HAVE IMPROVED THE FIRM'S BID OR OFFER,OR WHEN THE ORDER WAS PRICED EQUAL TO THE FIRM'S BID OR OFFER AND THE NATIONAL BEST BID OR OFFER IN SUCH SECURITY. Status: Final Sanction Detail: $10,000.00 FINED Summary: WEDBUSH MORGAN,WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,SUBMITTED A LETTER OF ACCEPTANCE,WAIVER&CONSNET,CONSENTING TO SANCTIONS AND THE ENTRY OF FINDINGS THAT ON A FEW OCCASIONS IT FAILED TO DISPLAY IMMEDIATELY CUSTOMER LIMIT ORDERS IN ITS PUBLIC QUOTATION,WHEN SUCH ORDER WAS AT A PRICE WHICH WOULD HAVE IMPROVED THE FIRM'S BID OR OFFER,OR WHEN THE ORDER WAS PRICED EQUAL TO THE FIRM'S BID OR OFFER AND THE NATIONAL BEST BID OR OFFER IN SUCH SECURITY.THE FIRM WAS CENSURED AND FINED $10,000.00.

Allegations: RESPONDENT:ENTERED PRICED ORDERS INTO SELECTNET BROADCAST THAT WERE PRICED BETTER THAN THE FIRM'S PUBLIC QUOTE WITHOUT REFLECTING EACH SUCH ORDER IN THE FIRM'S PUBLIC QUOTE;AND FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE ADEQUATE WRITTEN SUPERVISORY PROCEDURES DESIGNED TO ACHIEVE COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS AND REGULATIONS CONCERNING THE SEC'S ORDER HANDLING RULES AND NASD MARKETPLACE RULE 4613.(SEC RULE 11AC1-1(C)(5)AND NASD CONDUCT RULES 2110 AND 3010). Status: Final Sanction Detail: FINE OF $3,000.00***04/11/2000 GS: $3,000.00 PAID ON 12/07/1999 - INVOICE NO.99-MS858. Summary: NONE

Allegations: DUE TO AGE OF THIS FILING NO OTHER INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINE OF $1000.00 ON 03/30/1989 Summary: 07/02/1990 SEC LITIGATION, ACTIONS AND PROCEEDINGS BULLETIN FOR THE QUARTER ENDING 06/30/1989 (VOLUME 55,BULLETIN 02,PAGE 256)DISCLOSES: THE NEW YORK STOCK EXCHANGE FINED WEDBUSH MORGAN SECURITIES INC. $1,000.00 ON MARCH 30,1989 BASED ON A VIOLATION OF EXCHANGE RULE 132.30 AND FAILURE TO SUBMIT AUDIT TRAIL DATA IN ORDER TO QUALIFIED CLEARING AGENCY REGARDING STOCK TRANSACTIONS FOR THE WEEKS OF 9/12 AND 10/17/88.

Allegations: NASD RULE 2110-RESPONDENT MEMBER,ACTING THROUGH RESPONDENT HARLAN FAILED TO FILE AN MSRB FORM G-37. Status: Final Sanction Detail: FINE OF $250.00 - PAID J&S ON 10/30/1997, INVOICE #97-02-919 Summary: ON OCTOBER 6,1997,DIST NO.2 NOTIFIED RESPONDENTS WEDBUSH MORGAN SECURITIES INC.AND ROBERT DURLING HARLAN,JR.THAT THE LETTER OR ACCEPTANCE,WAIVER AND CONSENT NO.C02970040 WAS ACCEPTED;THEREFORE,THEY ARE CENSURED AND FINED $250,JOINTLY AND SEVERALLY (NASD RULE 2110-RESPONDENT MEMBER,ACTING THROUGH RESPONDENT HARLAN FAILED TO FILE AN MSRB FORM G-37 DISCLOSING THIS UNDERWRITING;AND FAILED TO TIMELY FILE AN MSRB FORM G-37 DISCLOSING A POLITICAL CONTRIBUTION).***$250.00 PAID J&S ON 10/30/97,INVOICE NO.97-02-919.

Allegations: WEDBUSH,NOBLE,COOKE,INC.,A MEMBER ORGANIZATION,VIOLATED:REGULATION 240.15C3-3 IN THAT ON SEVERAL OCCASIONS,IT DID NOT PROMPTLY OBTAIN AND /OR MAINTAIN THE PHYSICAL POSSESSION OF CONTROL OF ALL FULLY-PAID AND EXCESS MARGIN SECURITIES CARRIED BY IT FOR THE ACCOUNT OF CUSTOMERS;REGULATION 15C3-3(M),IN THAT WHEN IT HAD NOT OBTAINED POSSESSION OF SECURITIES OR WHICH IT HAD EXECUTED SELL ORDERS WITHIN 10 DAYS AFTER THE SETTLEMENT DATE,IT DID NOT EITHER IMMEDIATELY CLOSE THE TRANSACTIONS BY PURCHASING SECURITIES OF LIKE KIND AND QUANTITY OR OBTAIN APPROPRIATE EXTENSIONS;FORMER SECTION 220.4(C)(2)OF REGULATION "T" IN THAT,ON SEVERAL OCCASIONS,WHEN CUSTOMERS PURCHASED SECURITIES AND DID NOT MAKE FULL CASH PAYMENT WITHIN 7 DAYS AFTER THE PURCHASE DATE,IT DID NOT CANCEL OR LIQUIDATE THE TRANSACTION OR OBTAIN AN APPROPRIATE EXTENSION;FORMER SECTION 220.4(C)(8) OR REGULATION "T" AND EXCHANGE RULE 431(D)(9)IN THAT,ON SEVERAL OCCASIONS,IT FAILED TO PREVENT A CUSTOMER FROM PURCHASING,WITHOUT HAVING FUNDS IN HIS ACCOUNT SUFFICIENT FOR THAT PURPOSE,SECURITIES IN HIS CASH ACCOUNT WHEN,DURING THA PRECEDING 90 DAYS HE HAD PURCHASED A SECURITY IN THAT ACCOUNT AND SOLD THAT OTHER SECURITY WITHOUT HAVING PAID THEREFORE;EXCHANGE RULES 401 AND 409(B)(2)IN THAT IT FAILED TO PREVENT COMMUNICATIONS TO A NON-MEMBER CUSTOMER FROM BEING ADDRESSED TO ONE OF ITS EMPLOYEES;EXCHANGE RULE 401 IN THAT IT DID NOT PREVENT CHANGES IN ACCOUNT NAMES ON ORDERS TRANSMITTED TO THE FLOOR FROM BEING MADE BY AN EMPLOYEE WHO HAD NOT BEEN AUTHORIZED TO MAKE SUCH CHANGES PURSUANT TO THAT RULE;FORMER EXCHANGE RULES 472 AND 474B ON TWO OCCASIONS IN THAT IT DID NOT REQUIRE ITS EMPLOYEE WHO TELECAST BUSINESS NEWS TO PROVIDE COPIES OF HIS SCRIPTS OR TAPES AND DID NOT MAINTAIN A LOG OF HIS BROADCAST ENGAGEMENTS;AND EXCHANGE RULE 342(A)IN THAT IT DID NOT ADEQUATELY SUPERVISE ITS BUSINESS TO PREVENT THE ABOVE NOTED VIOLATIONS. Status: Final Sanction Detail: CENSURED AND FINED $25,000.00

Allegations: DUE TO AGE OF THIS FILING NO OTHER INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: CENSURED AND FINED $35,000.00 Summary: WEDBUSH,NOBLE,COOKE,INC. WAS CENSURE AND FINED $35,000.00 BY THE NEW YORK STOCK EXCHANGE FOR VIOLATIONS OF EXCHANGE RULES 431(D)(6), 431(D)(1), 401, AND 342(B).

Allegations: APRIL 12,1994 CHARGES ISSUED BY NYSE DIVISIONOF ENFORCEMENT-CHARGES:(1)VIOLATED 220.4 OF REGULATION OF THE FEDERAL RESERVE BOARD IN THAT THE FIRM EXTENDED CREDIT FOR THE PURCHASE OF SECURITIES WITHOUT REQUIRING PAYMENT;(2)VIOLATED EXCHANGE RULE 431(C)IN THAT THE FIRM FAILED TO ENSURE THAT CERTAIN ACCOUNTS MAINTAINED THE MARGIN EQUITY REQUIRED BY SAID RULE;(3)VIOLATED EXCHANGE RULE 472 IN THAT ONE OR MORE OCCASIONS THE FIRM DISTRIBUTED TO CUSTOMERS ONE OR MORE RESEARCH REPORTS WHICH HAD NOT BEEN APPROVED BY A SUPERVISORY ANALYST;(4)VIOLATED EXCHANGE RULE 472 IN THAT ON ONE OR MORE OCCASIONS WHEN THE FIRM DISTRIBUTED TO CUSTOMERA A WRITTEN COMMUNICATION THE FIRM FAILED TO DISCLOSE THAT IT WAS THEN A MARKET MAKER IN THE SUBJECT SECURITY;(5)VIOLATED EXCHANGE RULE 472 IN THAT ON ONE OR MORE OCCASIONS WHEN THE FIRM DISTRIBUTED TO CUSTOMERS A WRITTEN COMMUNICATION THE FIRM FAILED TO DISCLOSE THE INTEREST OF ONE OF ITS REGISTERED REPRESENTATIVES IN THE SUBJECT SECURITY;(6)VIOLATED EXCHANGE RULE 472 IN THAT ON ONE OR MORE OCCASIONS WHEN THE FIRM DISTRIBUTED TO CUSTOMERS A WRITTEN COMMUNICATION PREPARED BY AN OUTSIDE PERSON THE FIRM FAILED TO DISCLOSE SUCH AUTHORSHIP;(7)VIOLATED EXCHANGE RULE 472 IN THAT ON ONE OR MORE OCCASIONS THE FIRM PERMITTED A REGISTERED REPRESENTATIVE TO ENGAGE IN BROADCAST ACTIVITIES WITHOUT PRIOR WRITTEN APPROVAL BY THE FIRM;(8)VIOLATED EXCHANGE RULE 472 IN THAT THE FIRM FAILED TO ESTABLISH WRITTEN SUPERVISORY PROCEDURES APPLICABLE TO EMPLOYEES WHO MAKE RADIO OR TELEVISION APPEARANCES;(9)VIOLATED EXCHANGE RULE 791 IN THAT THE FIRM ALLOWED THE ISSUANCE OF SALES LITERATURE PERTAINING TO OPTIONS TO CUSTOMERS OR MEMBERS OF THE PUBLIC WITHOUT THE PRIOR APPROVAL OF THE FIRM'S COMPLIANCE REGISTERED OPTIONS PRINCIPAL OR DESIGNEE;(10)VIOLATED SEC REGULATION 240.10A-1(C)AND EXCHANGE RULE 440B.13 BY FAILING TO MARK SELL ORDER TICKETS"LONG" OR "SHORT";(11)VIOLATED EXCHANGE RULE 342(A) *SEE FAQ #1* Status: Final Sanction Detail: CONSENT TO CENSURE AND $80,000.00 FINE Summary: **FEBRUARY 3,1995**THE DECISION IS NOW FINAL IN WHICH WEDBUSH MORGAN SECURITIES INC.IS FINED THE SUM OF $80,000.00 AND CENSURED. CONTACT MS.PEGGY L. GERMINO AT (212)656-8450.

Allegations: DUE TO THE AGE OF THIS FILING NO OTHER INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: 07/22/1985 FINED $500.00 Summary: 02/04/1986:MARKET SURVEILLANCE COMMITTEE COMPLAINT MS-161-SC FILED:6/18/85 ALLEGED VIOLATION(S):EXCESS SPREAD DECISION RENDERED 7/22/85:$500 FINE

Allegations: DUE TO AGE OF THIS FILING NO OTHER INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINED $25.00 Summary: NASDAQ COMPLAINT N-V-39 FILED 2/24/1972:FINED $25.00 5/22/72:PAID FINE 6/16/72:FINAL

Allegations: DUE TO THE AGE OF THIS FILING NO MORE ADDITIONAL INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINED $250.00 Summary: MARKET SURVEILLANCE COMMITTE COMPLAINT #MS-499-AWC:LETTER OF ACCEPTANCE,WAIVER AND CONSENT(AWC)WAS FILED ON FEBRUARY 5,1987,ALLEGING VIOLATIONS OF PARTR 1,SECTION C.3.(C)OF SCHEDULE D OF THE ASSOCIATION'S BY-LAWS IN THAT RESPONDENT FAILED TO REPORT ITS NASDAQ VOLUME IN ONE SECURITY ON 12/18/86. THE AWC WAS ACCEPTED BY THE MARKET SURVEILLANCE COMMITTEE ON MARCH 6,1987 AND BY THE NATIONAL BUSINESS CONDUCT ON APRIL 7,1987. $250 FINE RECEIVED 2/17/87.

Allegations: DUE TO THE AGE OF THIS FILING NO MORE ADDITIONAL INFORMATIONS WERE PROVIDED. Status: Final Sanction Detail: FINED $250.00 Summary: MARKET SURVEILLANCE COMMITTE COMPLAINT #MS-432-AWC: LETTER OF ACCEPTANCE,WAIVER AND CONSENT(AWC)WAS FILED ON SEPTEMBER 25,1986,ALLEGING VIOLATIONS OF PART 1,SECTION C.3.(C)OF SCHEDULE D OF THE ASSOCIATION'S BY-LAWS IN THAT RESPONDENT FAILED TO REPORT ITS NASDAQ VOLUME IN ONE SECURITY ON 6/24/86,AND IN ONE SECURITY ON 7/16/86. THE AWC WAS ACCEPTED BY THE MARKET SURVEILLANCE COMMITTEE ON DECEMBER 4,1986 AND BY THE NATIONAL BUSINESS CONDUCT COMMITTEE ON JANUARY 12,1987. FINE $250.00

Allegations: NASD RULES 2110, 2320, 5430(A), 5430(A)- THE FIRM FAILED TO TRANSMIT THROUGH ACT LAST SALE REPORTS OF TRANSACTIONS WITHIN 90 SECONDS AFTER EXECUTION; AND IN 23 OCCASIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICE WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $27,500 ($20,000 FOR TRADE REPORTING AND $7,500 FOR NOT OBTAINING THE MOST FAVORABLE PRICE POSSIBLE UNDER PREVAILING MARKET CONDITIONS)AND RESTITUTION TO CLIENTS OF $742.22 PLUS INTEREST. Summary: OF THE 23 TRANSACTIONS THAT DID NOT RECEIVE THE MOST FAVORABLE PRICE POSSIBLE UNDER PREVAILING MARKET CONDITIONS, THE AVERAGE RESTITUTION WAS LESS THAN $35.00.

Allegations: FAILURE TO SUPERVISE Status: Final Sanction Detail: $50,000 PAID ON 4/24/89 -DEPOSIT NO.009 Summary: 5/29/85:COMPLAINT #SEA-334 FILED 2/22/84 BY DISTRICT NO.1 ALLEGING VIOLATIONS OF ARTICLE III,SECTIONS 1,2,15 ARTICLE IV,SECTION 5 OF THE RULES OF FAIR PRACTICE AND MSRB RULES G-17 AND G-19 IN THAT RESPONDENT MEMBER FAILED TO COMPLY WITH NASD'S FORMAL WRITTEN REQUESTS FOR INFORMATION MADE PURSUANT TO ARTICLE IV, SECTION 5 OF THE RULES OF FAIR PRACTICE***DECISION RENDERED 4/4/85,WHEREIN RESPONDENT MEMBER IS CENSURED,FINED $50,000 AND IS DIRECTED TO PROVIDE TO THE COMMITTEE WHAT SUPERVISORY PROCEDURES HAVE BEEN IMPLEMENTED TO PREVENT A RECURRENCE OF THE VIOLATIONS WITHIN 90 DAYS FROM THE DATE OF THE DECISION; ALLEGATIONS OF VIOLATIONS OF MSRB RULES G-17 AND G-19 AS CONTAINED IN THE SIXTH CAUSE OF COMPLAINT WERE DISMISSED***4/18/85, APPEALED TO BOARD.***DECISION RENDERED 3/20/86,WHEREIN SANCTIONS AS TO THE MEMBER, JONES AND PARKER ARE AFFIRMED. ALLEGATIONS OF FAILURE TO SUPERVISE WITH REGARD TO CAUSE TWO AND THREE ARE DISMISSED WITH REGARD TO THE RESPONDENTS MEMBER AND TEMPLETON IN THAT THE BOARD DETERMINED THAT HE PURPOSELY FAILED TO INFORM THE FIRM OF HIS DISCRETIONAY AUTHORITY AND THAT IT WAS THE BRANCH MANAGER'S FAILURE TO SUPERVISE JONES THAT PREVENTED THE FIRM FROM FULFILLING ITS SUPERVISORY RESPONSIBILITY. 5/7/86 -APPLEALED TO THE SEC. 4/12/88- SEC NEWS DIGEST ISSUE 88-61 DATED 3/31/88- THE SEC AFFIRMED SANCTIONS IMPOSED BY THE NASD ON WEDBUSH. THE SEC FOUND, AS HAD THE NASD,THAT,IN 1980-1982, THE FIRM FAILED TO EXERCISE PROPER SUPERVISION OVER TWO SALESMEN IN ITS BELLEVUE, WASHINGTON BRANCH OFFICE AND THAT THE FIRM IMPROPERLY DELAYED FURNISHING THE NASD WITH REQUESTED INFORMATION DURING THE NASD'S INVESTIGATIONOF THE SALESMEN'S ACTIVITIES.(REL.34-25504)***$50,000 PAID ON 4/24/89- DEPOSIT NO.009

Allegations: FROM JANUARY 1, 2005 THROUGH APRIL 30, 2005, THE FIRM DID NOT ACCEPT OR DECLINE IN THE NASDAQ MARKET CENTER ("NMC"), WITHIN TWENTY MINUTES AFTER EXECUTION TRANSACTIONS IN ELIGIBLE SECURITIES, A VIOLATION OF NASD MARKETPLACE RULE 6130(B). FURTHERMORE, THE FIRM DID NOT TRANSMIT LAST SALE REPORTS OF OTC EQUITY SECURITIES WITHIN 90 SECONDS AFTER EXECUTION NOR DESIGNATE SUCH REPORTS AS LATE DURING THE SAME PERIOD. IN ADDITION, THE SHORT INTEREST REPORT ON ONE STOCK WAS REPORTED INCORRECTLY IN APRIL 2004. THE FIRM'S SUPERVISORY SYSTEMS AND WRITTEN PROCEDURES WERE INEFFECTIVE TO ACHIEVE COMPLETE COMPLIANCE WITH THE SHORT INTEREST REPORTING REQUIREMENTS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $32,500. Summary: WITH RESPECT TO VIOLATION OF NASD RULE 6130(B), PLEASE NOTE THAT THE FIRM IS NOT RESPONSIBLE FOR TECHNICAL ISSUE CAUSED BY AN OUTSIDE VENDOR ON ITS SYSTEM. UPON DISCOVERY OF THE ISSUE, THE FIRM TOOK IMMEDIATE ACTION WITH THE OUTSIDE VENDOR AND HAS SINCE THEN CORRECTED THE ISSUE.

Allegations: NASD ALLEGED THAT THE FIRM DID NOT CONTINUOUSLY MAINTAIN TWO-SIDED QUOTATIONS IN THE ABSENCE OF THE GRANT OF AN EXCUSED WITHDRAWAL OR A FUNCTIONAL EXCUSED WITHDRAWAL BY THE SRO DURING THE PERIODS OF JULY 1 THROUGH SEPTEMBER 30, 2005 AND FROM APRIL 1 THROUGH JUNE 30, 2006. DURING THE ABOVE-MENTIONED PERIODS, THE FIRM WAS REGISTERED WITH NASD AS AN INTERMARKET TRADING SYSTEM/COMPUTER ASSISTED EXECUTION SYSTEM ("ITS/CAES") MARKET MAKER. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $5,000. Summary: PLEASE NOTE THAT NASDAQ AUTOMATICALLY REMOVES MARKET MAKER QUOTES WHENEVER THERE ARE ANY CORPORATE ACTIONS (I.E. PAYMENT OF DIVIDENDS), AND WHEN THIS HAPPENS MARKET MAKERS ARE CONSIDERED TO BE IN AN EXCUSED STATE IF NO NEW QUOTES ARE POSTED. DURING THE PERIOD OF JULY 1 THROUGH SEPTEMBER 30, 2005, THE NASDAQ SYSTEM REMOVED THE FIRM'S QUOTES BECAUSE OF DIVIDENDS BEING PAID BY THE ETF'S THE FIRM MADE MARKETS IN. SINCE THE FIRM NEVER UPDATED ITS QUOTES IN THE ETF'S IN QUESTION, THE FIRM WAS EXCUSED AND WITHDRAWN AS A MARKET MAKER IN THESE SECURITIES THUS ELIMINATING THE NEED TO POST TWO-SIDED QUOTES.

Allegations: IN THE RESULT OF THE 2004 AND 2005 TRADING AND MARKET MARKING SURVEILLANCE EXAMINATIONS, NASD ALLEGED THAT THE FIRM IS IN VIOLATION OF MARKETPLACE RULES 4632 AND 6130, NASD RULE 3110, SEC RULE 200(G), INEFFECTIVE SUPERVISORY PROCEDURES, AND OATS VIOLATIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $35,000.00. Summary: PLEASE NOTE THAT THE FIRM HAS CONDUCTED AN INTERNAL INVESTIGATION IN REGARDS TO THE MATTER. THE FIRM IS EVALUATING THE ADOPTION OF NEW INFORMATION SYSTEMS FOR PROPRIETARY TRADING OPERATIONS. IN ADDITION, THE FIRM HAS AMENDED ITS WRITTEN SUPERVISORY PROCEDURES, SPECIFICALLY IN THE AREAS OF MULTIPLE MPIDS, BEST EXECUTION, TRADE REPORTING, AND OTHER REGULATORY OBLIGATIONS.

Allegations: DURING THE TIME PERIOD FROM JANUAY 1, 2003 TO AUGUST 3, 2005, THE FIRM FILED 27 FORM U-5'S UNTIMELY, 5 OF THE 27 FORM U-5'S WERE FILED 1 OR 2 DAYS LATE. THE FIRM'S SUPERVISORY PROCEDURES WERE FOLLOWED INEFFECTIVELY IN THAT A FEW DEPARTMENT MANAGERS DID NOT ADVISE THE FIRM'S BUSINESS CONDUCT DEPARTMENT WHICH WAS RESPONSIBLE FOR FILING THE FORM U-5. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED AND AGREED TO PAY AN AWC AMOUNT OF $18,000.

Allegations: FINRA ACCUSED THE FIRM OF VIOLATION OF SEC RULE 605 REPORTING 6 TRADES INCORRECTLY, NASD RULE 6955 REPORTING 11 TRADES INCORRECTLY TO OATS, SEC RULE 17A-3 AND NASD RULE 3110 INCORRECT TIME ON 4 TICKETS AND NASD RULES 2110 AND 3010 FOR NOT HAVING SUFFICIENT WSP'S REGARDING SEC RULE 605 Status: Final Sanction Detail: $5,000 FOR 605 VIOLATION; $5,000 FOR 6955 VIOLATION; $7,500 FOR THE 17A-S AND 3110 VIOLATION AND $5,000 FOR THE 2110 AND 3010 VIOLATION. Summary: THE FIRM AND FINRA SETTLED THE MATTER AND THE FIRM NEITHER ADMITTED NOR DENIED THE FINDINGS

Allegations: FINRA ACCUSED THE FIRM OF VIOLATING SEC RULE 604 IN FAILING TO IMMEDIATELY DISPLAY 52 CUSTOMER LIMIT ORDERS, RULE 5430 AND 2110 FOR HAVING FAILED TO REPORT 109 ORDERS WITHIN 90 SECONDS AND MSRB RULE G14 FOR HAVING NOT REPORTED 90 MUNICIPAL SECURITIES WITHIN 15 MINUTES Status: Final Sanction Detail: FINED $5,000 FOR RULE 604 VIOLATION, $14,000 FOR THE 5430 AND 2110 VIOLATIONS AND $5,000 FOR THE G-14 VIOLATIONS Summary: THE FIRM AND FINRA SETTLED THE CASES AND THE FIRM NEITHER ADMITTED NOR DENIED THE FINDINGS.

Allegations: THE FIRM WAS ACCUSED OF VIOLATING NASD RULE 6955 IN HAVING REPORTED TO OATS 58 REPORTS THAT CONTAINED INACCURATE, INCOMPLETE OR IMPROPERLY FORMATTED DATA. Status: Final Sanction Detail: THE FIRM AGREED TO PAY A FINE OF $7,500 FOR VIOLATIONS OF NASD RULE 6955 REPORTING 58 TRADES TO OATS INCORRECTLY. Summary: THE FIRM AND FINRA SETTLED THE MATTER AND THE FIRM NEITHER ADMITTED NOR DENIED THE FINDINGS

Allegations: VIOLATION OF SEC RULE 17A-3(A)(6), NASD RULES 2110,3110,6230 INACCURATELY REPORTING 60 TRANSACTIONS TO TRACE INACCURATE TIME STAMPS ON 39 TRADES Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, A CENSURE AND FINE IN THE AMOUNT OF $7,500.

Allegations: FROM JANUARY 1 THROUGH MARCH 31, 2008 THE FIRM FAILED TO REPORT 171 TRADES WITHIN THE REQUIRED 15 MINUTES ON RTRS. THE FIRM ALSO REPORTED 78 TRADES TWICE IN ERROR AND THE WRONG TIME ON 11 TRADES IN SEPARATE VIOLATIONS OF MSRB RULE G-14. Status: Final Sanction Detail: CENSURE AND FINE IN THE AMOUNT OF $7,000

Allegations: MSRB RULES G-17, G-30(A) - WEDBUSH MORGAN SECURITIES INC. SOLD MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO CUSTOMERS AT AN AGGREGATE PRICE (INCLUDING ANY MARKDOWN OR MARKUP) THAT WAS NOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL DOLLAR AMOUNT OF THE TRANSACTION. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED AND FINED $12,500. THE FIRM MADE RESTITUTION TOTALING $5,986.26 TO CUSTOMERS.

Allegations: WEDBUSH REPORTED LAST SALE TRANSACTIONSTO THE FNTRF IT SHOULD NOT HAVE REPORTED. THE FIRM FAILED TO REPORT TO THE FNTRF THE CORRECT TIME AND SYMBOL INDICATING THE CAPACITY IN WHICH IT EXECUTED THE TRASACTIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS. THE FIRM WAS FINED $10,000 AND CENSURED.

Allegations: FROM JULY 1 TO SEPTEMBER 30 2007 THE FIRM FAILED TO IMMEDIATELY DISPLAY 24 ORDER IN VIOLATION OF SEC RULE 604 OF REG NMS. FROM JULY 1 TO SEPTEMBER 30, 2007 THE FIRM FAILED TO TRANSMIT 65 ROE'S TO OATS IN VIOLATION OF NASD RULE 6955(A). Status: Final Sanction Detail: CENSURED AND FINED $13,500 Summary: THE FIRM ACCEPTED AND CONSENTED, WITHOUT ADMITTING OR DENYING THE FINDINGS NOTED ABOVE.

Allegations: THE FIRMS WRITTEN SUPERVISORY PROCEDURES WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH NASDAQ RULES CONCERNING CLEARLY ERRONEOUS TRANSACTION COMPLAINTS. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $10,000 AND REQUIRED TO REVISE THE WRITTEN SUPERVISORY PROCEDURES REGARDING NASD NOTICE TO MEMBERS 04-66 Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS

Allegations: IN MARCH 2009 AN OPERATIONS EMPLOYEE AT ONE OF THE FIRM'S BRANCH OFFICES ERRONEOUSLY TENDERED CORPORATE BONDS HELD IN FIVE CUSTOMER ACCOUNTS AT THE FIRM. AFTER SEVERAL UNSUCCESSFUL ATTEMPTS BY THE FIRM TO RESCIND THE TENDER, THE FIRM CREATED A SHORT POSITION IN THE ERROR ACCOUNT OF THE BRANCH OFFICE WHERE THE TENDER HAD OCCURRED. THE FIRM DETERMINED THAT IT WAS REQUIRED TO NEITHER BUY NOR BORROW ITS CUSTOMERS' BONDS POSITIONS BASED ON A LONGSTANDING INTERPRETATION OF EXCHANGE ACT RULE 15C3-3, WHICH RELIEVES BROKER-DEALERS OF THEIR NORMAL POSSESSION AND CONTROL OBLIGATIONS UNDER CERTAIN CIRCUMSTANCES. IN THIS CASE, HOWEVER, THE FIRM WAS NOT ENTITLED TO THE BENEFIT OF THE INTERPRETATION BECAUSE THE INTERPRETATION ONLY APPLIES TO FIRM SHORT POSITIONS THAT RESULT FROM ACTUAL SHORT SALES TO CUSTOMERS. THE CUSTOMER REQUESTED THAT BOTH OF HIS ACCOUNTS BE TRANSFERRED IN THEIR ENTIRETY TO ANOTHER BROKER-DEALER VIA THE AUTOMATED CUSTOMER ACCOUNT TRANSFER SERVICE (ACATS). TO THAT END, THE RECEIVING BROKER-DEALER SENT THE FIRM A TRANSFER INITIATION FORM (TIF) FOR EACH OF THE TWO ACCOUNTS. IN LIGHT OF THE RESTRICTED FLAG ASSOCIATED WITH THE CUSTOMER'S BOND POSITIONS AND THE LACK OF A VALID CUSIP NUMBER, THE FIRM'S ACATS DEPARTMENT DID NOT TRANSFER ANY OF THE CUSTOMER'S BONDS. SPECIFICALLY, THE FIRM'S ACATS DEPARTMENT VALIDATED THE TIF FOR ONE OF THE ACCOUNTS BUT DELETED THE BOND POSITION FROM THE TRANSFER. AS TO THE SECOND ACCOUNT, THE FIRM'S ACATS DEPARTMENT REJECTED THE TIF ALTOGETHER, AS THE ONLY SECURITIES IN THE ACCOUNT WERE THE BONDS. VIOLATIONS OF SEC EXCHANGE ACT RULE 15C3-3(B)(1), FINRA RULE 2010, NASD RULE 11870 Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS. THE FIRM IS CENSURED AND FINED $15,000.

Allegations: MSRB RULES G-32 AND G-36: FROM JUNE 2, 2008 THROUGH JUNE 30, 2011, THE FIRM DID NOT TIMELY FILE OFFICIAL STATEMENTS (OS) FOR 39 PRIMARY MUNICIPAL OFFERINGS IN WHICH IT ACTED AS A LEAD OR SOLE MANAGER. MSRB RULE G36(B)(I) REQUIRES AN UNDERWRITER TO SEND THE FILE OFFICIAL STATEMENT FOR A MUNICIPAL OFFERING TO THE MSRB WITHIN ONE BUSINESS DAY AFTER THE OFFICIAL STATEMENT IS RECEIVED FROM THE ISSUER, BUT NO LATER THAN TEN BUSINESS DAYS AFTER THE FINAL AGREEMENT. MSRB RULE G-32 REPLACED MSRB RULE G-36 AS OF JUNE 1, 2009. MSRB RULE G-32(B)(I)(B)( 1) REQUIRES THE UNDERWRITER OF A PRIMARY OFFERING OF MUNICIPAL SECURITIES TO SEND THE OFFICIAL STATEMENT TO THE ELECTRONIC MUNICIPAL MARKET ACCESS (EMMA) WITHIN ONE BUSINESS DAY AFTER RECEIPT OF THE OFFICIAL STATEMENT FROM THE ISSUER, BUT BY NO LATER THAN THE CLOSING DATE. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE THE FIRM IS FINED $5,000.

Allegations: SECTION 12(K)(2) OF THE SEA OF 1934 - WEDBUSH SECURITIES FAILED IN SEVERAL INSTANCES TO PROHIBIT EXECUTIONS IN SHORT SALES SUBJECT TO THE SEC EMERGENCY ORDER BY NON-BROKER-DEALER SPONSORED ACCESS CLIENTS OF THE FIRM. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS. THE FIRM WAS CENSURED AND FINED $35,000 Summary: THE FIRM WAS CENSURED AND FINED $35,000 11/21/2012.

Allegations: BATS RULES 5.1, 11.19 - WEDBUSH SECURITIES, INC.'S SUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES (WSPS) WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND BATS RULES CONCERNING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS AND SHORT SALE ORDER ENTRY ON THE BATS EXCHANGE. THE FIRM FAILED TO CORRECTLY INDICATE WHETHER TWO ORDERS WERE A BUY, SHORT SALE OR LONG SALE IN SOME TRANSACTIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS. WEDBUSH WAS CENSURED, FINED $12,500, AND REQUIRED TO REVISE IT WSP'S REGARDING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS AND SHORT SALE ORDER ENTRY ON THE BATS EXCHANGE WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE APPEALS COMMITTEE. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $12,500, AND REQUIRED TO REVISE IT WSPS REGARDING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS AND SHORT SALE ORDER ENTRY ON THE BATS EXCHANGE WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE APPEALS COMMITTEE WHICH DID ACCEPT THE AWC ON MARCH 8, 2013.

Allegations: NASDAQ RULES 2110, 3010, 4755 - WEDBUSH SECURITIES, INC.'S SUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND NASDAQ RULES CONCERNING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS. THE FIRM FAILED TO CORRECTLY INDICATE WHETHER ORDERS WERE A BUY, SHORT SALE OR LONG SALE FOR SOME ORDERS ENTERED INTO THE NASDAQ MARKET CENTER. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; WEDBUSH WAS CENSURED, FINED $12,500 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES REGARDING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NATIONAL REVIEW COUNSEL. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; WEDBUSH WAS CENSURED, FINED $12,500 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES REGARDING THE PREVENTION OF ERRONEOUS ORDERS AND TRANSACTIONS AND NON-MERITORIOUS CLEARLY ERRONEOUS TRANSACTION COMPLAINTS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NATIONAL REVIEW COUNSEL AND WHICH WAS ACCEPTED ON APRIL 2 2013.

Allegations: SEC RULES 10B-10, 17A-3, SEC RULE 605 OF REGULATION NMS, SEC RULE 200(G) OF REGULATION SHO, FINRA RULES 2010, 6182, NASD RULES 3010, 3110 WEDBUSH SECURITIES INC. FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMERS ITS CORRECT CAPACITY IN TRANSACTIONS AND THE REPORTED PRICE. THE FIRM MADE AVAILABLE REPORTS ON THE COVERED ORDERS IN NATIONAL MARKET SYSTEM (NMS) SECURITIES IT RECEIVED FOR EXECUTION FROM ANY PERSON. THE REPORTS INCLUDED INCORRECT INFORMATION AS TO ORDER TYPE AND SIZE CATEGORIES. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND/OR FINRA RULES ADDRESSING QUALITY OF MARKET TOPICS. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) FAILED TO PROVIDE FOR MINIMUM REQUIREMENTS FOR ADEQUATE WSPS IN ORDER HANDLING (DISCLOSURE OF ORDER ROUTING INFORMATION); TRADE REPORTING (RISKLESS PRINCIPAL TRADES REPORTING ON FIRM'S BEHALF, ACCURATE REPORTING BY THIRD PARTY); SALES TRANSACTIONS (DETERMINING AND MARKING SALES AS LONG OR SHORT)(PROMPT DELIVERY OF SALES TRANSACTIONS BY SETTLEMENT); (PRE-BORROWING IN AGED FAILS, ACCEPTING SHORT SALE ORDERS AFTER AN AGED FAIL OCCURS, NAKED SHORT SELLING ANTIFRAUD RULE, REPORTING SHORT SALE INDICATORS, REPORTING SALES AS LONG OR SHORT); PROMPT DELIVERY OF SALES TRANSACTIONS BY SETTLEMENT; AND OTHER RULES (BOOKS AND RECORDS). THE FIRM FAILED TO PROVIDE EVIDENCE OF SUPERVISORY REVIEW FOR TRADE REPORTING (RISKLESS PRINCIPAL TRADES, RISKLESS PRINCIPAL TRADES REPORTING ON FIRM'S BEHALF) (ORDER ENTRY INTO NASDAQ) (ACCURATE REPORTING BY THIRD PARTY); AND OTHER RULES (BOOKS AND RECORDS). THE FIRM FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMERS ITS CORRECT CAPACITY IN TRANSACTIONS AND THE CORRECT PRICE AND THE AVERAGE PRICE DETAILS. THE FIRM FAILED TO PROPERLY MARK SELL ORDERS AS SHORT AND, AS A RESULT, FAILED TO REPORT TRANSACTIONS IN REPORTABLE SECURITIES TO THE TRADE REPORTING FACILITY WITH A SHORT SALE INDICATOR. THE FIRM FAILED TO SHOW THE CORRECT ORDER ENTRY TIME AND THE CORRECT LONG/SHORT SALE INDICATOR IN ITS PROPRIETARY TRADING LEDGER. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $72,500 AND REQUIRED TO REVISE ITS WSPS REGARDING ORDER HANDLING (DISCLOSURE OF ORDER ROUTING INFORMATION); TRADE REPORTING (RISKLESS PRINCIPAL TRADES REPORTING ON FIRM'S BEHALF, ACCURATE REPORTING BY THIRD PARTY); SALES TRANSACTIONS (DETERMINING AND MARKING SALES AS LONG OR SHORT)(PROMPT DELIVERY OF SALES TRANSACTIONS BY SETTLEMENT); (PRE-BORROWING IN AGED FAILS, ACCEPTING SHORT SALE ORDERS AFTER AN AGED FAIL OCCURS, NAKED SHORT SELLING ANTIFRAUD RULE, REPORTING SHORT SALE INDICATORS, REPORTING SALES AS LONG OR SHORT); PROMPT DELIVERY OF SALES TRANSACTIONS BY SETTLEMENT; AND OTHER RULES (BOOKS AND RECORDS) WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC. Summary: THE FIRM SIGNED THE PROPOSED AWC ON MAY 30 2013 AND IT WAS ACCEPTED BY FINRA ON JUNE 25 2013.

Allegations: FINRA RULES 2010, 4560, 6380A(A), 6730(A), NASD RULES 2110, 3010, 3360, NYSE RULE 421 - WEDBUSH SECURITIES INC., DURING A TWO-YEAR SHORT INTEREST REVIEW PERIOD, SUBMITTED INACCURATE SHORT INTEREST POSITION REPORTS TO FINRA AND ALSO FAILED TO REPORT SHORT INTEREST POSITIONS. DURING A TWO-YEAR SHORT INTEREST REVIEW PERIOD, THE FIRM SUBMITTED INACCURATE SHORT INTEREST POSITION REPORTS TO FINRA WHICH INCLUDED SHORT INTEREST POSITIONS FOR CERTAIN NASDAQ, NYSE, NYSE AMEX, NYSE ARCA, AND OVER-THE-COUNTER (OTC) EQUITY SECURITIES. DURING A TRADE REPORTING REVIEW PERIOD, THE FIRM FAILED, WITHIN 90 SECONDS AFTER EXECUTION, TO TRANSMIT TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) LAST SALE REPORTS OF TRANSACTIONS IN NATIONAL MARKET SYSTEM (NMS) SECURITIES. THIS CONDUCT CONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF FINRA RULE 6380A(A) AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUT EXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF FINRA RULE 2010. THE FIRM FAILED TO REPORT TO THE TRADE REPORTING AND COMPLIANCE ENGINE (TRACE) TRANSACTIONS IN TRACE-ELIGIBLE AGENCY DEBT SECURITIES WITHIN 15 MINUTES OF THE EXECUTION TIME. THIS CONDUCT CONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF FINRA RULE 6730(A) AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUT EXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF FINRA RULE 2010. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $87,500 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES REGARDING SHORT INTEREST POSITION REPORTS WITHIN 90 DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $87,500 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES REGARDING SHORT INTEREST POSITION REPORTS WITHIN 90 DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC.

Allegations: MSRB RULES G-8, G-14, AND G-27, FINRA RULES 2010 AND 2110(A), AND NASD RULE 2320: THE FIRM FAILED TO EXECUTE ORDERS FULLY AND PROMPTLY AND IN TRANSACTIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. THE FIRM FAILED TO REPORT INFORMATION REGARDING PURCHASE AND SALE TRANSACTIONS IN MUNICIPAL SECURITIES TO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) IN THE MANNER PRESCRIBED BY RULE G-14 RTRS PROCEDURES AND THE RTRS USER'S MANUAL; THE FIRM FAILED TO REPORT THE CORRECT TIME OF TRADE TO THE RTRS IN MUNICIPAL SECURITIES TRANSACTIONS, AND FAILED TO REPORT INFORMATION THE TRANSACTIONS WITHIN 15 MINUTES OF TIME OF TRADE TO AN RTRS PORTAL. THE FIRM FAILED TO SHOW THE CORRECT TIME OF EXECUTION ON THE MEMORANDUM OF MUNICIPAL SECURITIES TRANSACTIONS FOR THE ACCOUNT OF THE FIRM EXECUTED WITH ANOTHER BROKER OR DEALER. THE FIRM IMPROPERLY REPORTED INFORMATION TO THE RTRS THAT IT SHOULD NOT HAVE; THE FIRM IMPROPERLY REPORTED PURCHASE AND SALE TRANSACTIONS IN MUNICIPAL SECURITIES TO THE RTRS, WHEN THE INTER-DEALER DELIVERS WERE STEP OUTS AND THUS WERE NOT INTER-DEALER TRANSACTIONS REPORTABLE TO THE RTRS. THE FIRM FAILED TO ENFORCE ITS WRITTEN SUPERVISORY PROCEDURES, WHICH SPECIFIED THAT THE FIRM WOULD PERFORM DAILY REVIEWS OF TRADES ON THE MSRB WEBSITE FOR ACCURACY AND TIMELINESS AND MONTHLY REVIEWS OF THE FIRM'S MSRB REPORTS CARDS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE IT IS CENSURED AND FINED $95,000 ($15,000 FOR VIOLATIONS OF NASD RULE 2320, FINRA RULE 2010, AND FINRA RULE 2111(A), $67,500 FOR VIOLATIONS OF MSRB RULE G-14, $7,500 FOR VIOLATIONS OF MSRB RULE G-8, AND $5,000 FOR VIOLATIONS OF MSRB RULE G-27). Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE IT IS CENSURED AND FINED $95,000 ($15,000 FOR VIOLATIONS OF NASD RULE 2320, FINRA RULE 2010, AND FINRA RULE 2111(A), $67,500 FOR VIOLATIONS OF MSRB RULE G-14, $7,500 FOR VIOLATIONS OF MSRB RULE G-8, AND $5,000 FOR VIOLATIONS OF MSRB RULE G-27).

Allegations: NYSE RULES 123C, 132(A), 342(A) AND (B), 2010, WEDBUSH SECURITIES INC. FAILED TO COMPLY WITH REQUIREMENTS GOVERNING THE CANCELLATION OF MARKET-ON-CLOSE (MOC), LIMIT- ON-CLOSE (LOC) AND CLOSING OFFSET (CO) ORDERS ON THE NYSE, IN THAT VARIOUS DIRECT MARKET ACCESS AND SPONSORED ACCESS (MARKET ACCESS) CUSTOMERS TO WHICH THE FIRM PROVIDED ACCESS TO TRADE DIRECTLY ON THE NYSE VIA A FIRM MNEMONIC HAD CANCELLED ORDERS ON THE NYSE BETWEEN 3:45 P.M. AND 3:58 P.M. THAT WERE NOT THE RESULT OF LEGITIMATE ORDER ERRORS. FIRM MARKET ACCESS CUSTOMER TRADING VIA A FIRM MNEMONIC TESTED THE CONNECTIVITY OF ITS ELECTRONIC SYSTEMS TO THE NYSE'S SYSTEMS IN A MANNER INCONSISTENT WITH ESTABLISHED PROCEDURES BY ENTERING AND SENDING TO THE NYSE LOC ORDERS AND CANCELLATIONS, OVER DIFFERENT TRADE DATES TO PURCHASE TWO STOCKS AT A LIMIT PRICE OF $.01, WHEN THE STOCKS HAD TRADED AT $15 AND $40, RESPECTIVELY; SUCH ORDERS WERE ENTERED IN THE GUISE OF ACTUAL ORDERS WITHOUT DENOTING EACH MESSAGE AS A TEST ORDER OR CANCELLATION. BY PERMITTING ITS MARKET ACCESS CUSTOMER TO TEST ITS ELECTRONIC ORDER ROUTING SYSTEMS' CONNECTIVITY TO THE NYSE'S SYSTEMS IN A MANNER INCONSISTENT WITH ESTABLISHED NYSE PROCEDURES, THE FIRM FAILED TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE IN THE CONDUCT OF ITS BUSINESS. THE FIRM HAD NO WRITTEN SUPERVISORY PROCEDURES OR SYSTEMS, INCLUDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 123C WITH RESPECT TO MOC, LOC AND CO ORDERS ENTERED AND CANCELLED BY FIRM MARKET ACCESS CUSTOMERS. THE FIRM, THROUGH TWO MARKET ACCESS CUSTOMERS WHICH WERE NON-MEMBER ORGANIZATIONS UNAFFILIATED WITH THE FIRM, SUBMITTED FOR COMPARISON OR SETTLEMENT NUMEROUS TRANSACTIONS VIA A FIRM MNEMONIC THAT WERE ERRONEOUSLY MARKED WITH A "P" ACCOUNT TYPE INDICATOR CODE, WHEN SUCH ORDERS SHOULD HAVE BEEN MARKED WITH AN "A" ACCOUNT TYPE INDICATOR CODE. THE FIRM HAD NO WRITTEN SUPERVISORY PROCEDURES OR SYSTEMS, INCLUDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 132 WITH RESPECT TO ACCOUNT TYPE INDICATOR CODES ON ORDERS ENTERED ON THE NYSE BY FIRM MARKET ACCESS CUSTOMERS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $95,000 AND REQUIRED TO REVISE ITS SUPERVISORY SYSTEMS REGARDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 123C WITH RESPECT TO MOC,LOC AND CO ORDERS ENTERED AND CANCELLED BY FIRM MARKET ACCESS CUSTOMERS AND A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 132 WITH RESPECT TO ACCOUNT TYPE INDICATOR CODES ON ORDERS ENTERED ON THE NYSE BY FIRM MARKET ACCESS CUSTOMERS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY FINRA'S OFFICE OF DISCIPLINARY AFFAIRS. FINE WAS PAID JANUARY 14, 2014. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $95,000 AND REQUIRED TO REVISE ITS SUPERVISORY SYSTEMS REGARDING A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 123C WITH RESPECT TO MOC,LOC AND CO ORDERS ENTERED AND CANCELLED BY FIRM MARKET ACCESS CUSTOMERS AND A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW, REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH NYSE RULE 132 WITH RESPECT TO ACCOUNT TYPE INDICATOR CODES ON ORDERS ENTERED ON THE NYSE BY FIRM MARKET ACCESS CUSTOMERS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY FINRA'S OFFICE OF DISCIPLINARY AFFAIRS. FINE WAS PAID JANUARY 14, 2014.

Allegations: WEDBUSH SECURITIES INC. ("WEDBUSH"), A CBOE STOCK EXCHANGE, LLC ("CBSX") TPH ORGANIZATION, WAS CENSURED AND FINED $5,000 FOR THE FOLLOWING CONDUCT. WEDBUSH FAILED TO ESTABLISH AND MAINTAIN A UNIQUE LOGON ID BY OR BEFORE JANUARY 2, 2012 AND, AS A RESULT, IMPROPERLY CAUSED NUMEROUS ORDERS TO BE EXECUTED THROUGH A LOGON ID THAT WAS NOT UNIQUE, AS REQUIRED BY CBSX REGULATORY CIRCULAR 11-151. (EXCHANGE RULE 4.1 - JUST AND EQUITABLE PRINCIPLES OF TRADE) Status: Final Sanction Detail: A $5,000 FINE AND A CENSURE.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ENTERED ORDERS INTO THE NASDAQ MARKET CENTER THAT FAILED TO CORRECTLY INDICATE WHETHER THE ORDERS WERE A BUY, SHORT SALE OR LONG SALE. AS A RESULT, THE FIRM VIOLATED NASDAQ RULE 4755. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ENTERED ORDERS INTO THE NASDAQ MARKET CENTER THAT FAILED TO CORRECTLY INDICATE WHETHER THE ORDERS WERE A BUY, SHORT SALE OR LONG SALE. AS A RESULT, THE FIRM VIOLATED NASDAQ RULE 4755. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT ENTERED ORDERS INTO THE NASDAQ MARKET CENTER THAT FAILED TO CORRECTLY INDICATE WHETHER THE ORDERS WERE A BUY, SHORT SALE OR LONG SALE. AS A RESULT, THE FIRM VIOLATED NASDAQ RULE 4755.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IN 16 INSTANCES, THE FIRM HAD A FAIL-TO-DELIVER POSITION AT A REGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THAT RESULTED FROM SALES OF A SECURITY THAT THE SELLER WAS DEEMED TO OWN PURSUANT TO §242.200 OF REGULATION SHO AND INTENDED TO DELIVER ONCE ALL RESTRICTIONS ON DELIVERY HAD BEEN REMOVED, AND DID NOT CLOSE THE FAIL-TO-DELIVER POSITION BY PURCHASING OR BORROWING SECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIMEFRAME PRESCRIBED BY RULE 204(A)(2) OF REGULATION SHO. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $20,000. Summary: THE FIRM WAS CENSURED AND FINED $20,000 ON 10/22/2014

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT TRANSMITTED REPORTS TO THE ORDER AUDIT TRAIL SYSTEM (OATS) THAT CONTAINED INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA. THE FINDINGS STATED THAT THE FIRM FAILED TO PROVIDE WRITTEN NOTIFICATIONS DISCLOSING TO ITS CUSTOMERS THAT TRANSACTIONS WERE EXECUTED AT AVERAGE PRICES, THAT TRANSACTION DETAILS WERE AVAILABLE UPON REQUEST, ITS CAPACITY IN THE TRANSACTIONS, AND/OR THAT IT CHARGED COMMISSIONS OR COMMISSION EQUIVALENTS. THE FIRM FAILED TO PREPARE ACCURATE BOOKS AND RECORDS. THE FIRM FAILED TO PROPERLY MARK PROPRIETARY SELL ORDERS AS LONG AND FAILED TO MARK SALE ORDERS AS SHORT AND AS A RESULT, THE FIRM FAILED TO REPORT THESE TRANSACTIONS TO VARIOUS EXCHANGES WITH THE CORRECT SYMBOL INDICATING WHETHER THE TRANSACTIONS WERE LONG OR SHORT. THE FIRM FAILED TO REPORT TRANSACTIONS IN TRADE REPORTING AND COMPLIANCE ENGINE (TRACE)-ELIGIBLE SECURITIZED PRODUCTS TO TRACE WITHIN 15 MINUTES OF THE TIME OF EXECUTION. THE FINDINGS ALSO STATED THAT THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO CERTAIN APPLICABLE SECURITIES LAWS AND REGULATIONS, AND/OR FINRA RULES. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) FAILED TO PROVIDE FOR ONE OR MORE OF THE FOUR MINIMUM REQUIREMENTS FOR ADEQUATE WSPS REGARDING ACCURATELY IDENTIFY BUY, SHORT SALE, AND LONG SALE INFORMATION AND CLEARLY ERRONEOUS FILINGS, AND FAILED TO PROVIDE EVIDENCE OF SUPERVISORY REVIEW REGARDING ACCURACY OF BOOKS AND RECORDS. THE FINDINGS ALSO INCLUDED THAT THE FIRM ALLOWED A REGISTERED REPRESENTATIVE TO ENGAGE IN PROPRIETARY TRADING AND ROUTING CUSTOMERS' ORDERS FOR EXECUTION ON BEHALF OF THE FIRM WITHOUT BEING PROPERLY REGISTERED AS A GENERAL SECURITIES REPRESENTATIVE AND EQUITY TRADER. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $67,500 AND UNDERTAKES TO REVISE ITS WSPS. Summary: THE FIRM WAS CENSURED, FINED $67,500 AND UNDERTAKES TO REVISE ITS WSPS.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO PROPERLY MARK SELL ORDERS AS LONG OR SHORT AND, AS A RESULT, ALSO FAILED TO REPORT THE TRANSACTIONS IN REPORTABLE SECURITIES TO THE FINRA TRADE REPORTING FACILITY WITH THE CORRECT SYMBOL INDICATING WHETHER THE TRANSACTIONS WERE LONG OR SHORT. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $17,500. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO PROPERLY MARK SELL ORDERS AS LONG OR SHORT AND, AS A RESULT, ALSO FAILED TO REPORT THE TRANSACTIONS IN REPORTABLE SECURITIES TO THE FINRA TRADE REPORTING FACILITY WITH THE CORRECT SYMBOL INDICATING WHETHER THE TRANSACTIONS WERE LONG OR SHORT.

Allegations: THE FIRM VIOLATED NYSE ARCA EQUITIES RULE 2.24 AND SEC RULE 17A-3, BY FAILING TO RECORD ON ITS TRADE BLOTTERS ACCURATE EXECUTION TIMES FOR 226 TRANSACTIONS IN SIX SEPARATE SECURITIES. Status: Final Sanction Detail: THE FIRM IS CENSURED AND FINED $7,500. Summary: A FINRA HEARING OFFICER CONSIDERED AN OFFER OF SETTLEMENT AND CONSENT ENTERED INTO BETWEEN FINRA ON BEHALF OF NYSE REGULATION, INC. AND THE FIRM. WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS, THE HEARING OFFICER ACCEPTED THE OFFER OF SETTLEMENT AND CONSENT AND ISSUED A DECISION ON MAY 12, 2015.

Allegations: WMS WAS ALLEGED TO BE IN VIOLATION OF "FIRM QUOTE RULE" NASD RULE 3320 AND NASD RULE 4613(B). Status: Final Sanction Detail: IN ORDER TO AVOID THE EXPENSE AND CONSUMPTION OF TIME REQUIRED TO RESPOND TO THIS INQUIRY, WMS CONSENTED TO A CENSURE AND A FINE OF $8000.00 TO SETTLE ALLEGATIONS OF VIOLATIONS RELATING TO THE "FIRM QUOTE RULE" NASD RULE 3320 AND NASD RULE 4613(B). WMS PAID TOTAL FINE OF $8000.00 ON 5/11/1999. FIRM WRITTEN SUPERVISORY PROCEDURES WERE REVISED TO BE IN COMPLIANCE WITH "FIRM QUOTE RULE".

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND FEBRUARY 28, 2011, THE FIRM FAILED TO REPORT NUMEROUS REPORTABLE OPTIONS POSITIONS BECAUSE THE FIRM HAD FAILED TO PROPERLY AGGREGATE AND REPORT POSITIONS TO THE OPTIONS CLEARING CORPORATION (OCC) LARGE OPTIONS POSITIONS REPORT (LOPR) FOR APPROXIMATELY 39 ACCOUNTS RELATED TO FIVE ACTING IN CONCERT (AIC) GROUPS THAT ACTED IN CONCERT. THIS CONDUCT VIOLATED CHAPTER XVIII, SECTION 18.10 OF THE BZX EXCHANGE RULES. DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND FEBRUARY 28, 2011, THE FIRM FAILED TO HAVE AN ADEQUATE SUPERVISORY SYSTEM IN PLACE TO ENSURE THE ACCURACY AND COMPLETENESS OF THE REPORTING OF ITS OPTIONS POSITIONS, INCLUDING IN-CONCERT REPORTING, TO THE LOPR. THIS CONDUCT VIOLATED CHAPTER XVIII, RULE 18.2(A)(1) OF THE BZX EXCHANGE RULES. DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND THE PRESENT, THE FIRM HAS FAILED TO HAVE ADEQUATE WRITTEN SUPERVISORY PROCEDURES (WSPS) REGARDING IN-CONCERT REPORTING TO THE LOPR AND TO ENSURE THE ACCURACY AND COMPLETENESS OF ITS DAILY LOPR SUBMISSIONS. SPECIFICALLY, THE FIRM'S WSPS FAIL TO REFLECT: (I) THE STEP(S) THAT THE FIRM'S DESIGNATED PERSON RESPONSIBLE TO ENSURE COMPLIANCE WITH APPLICABLE RULES SHOULD TAKE TO ENSURE COMPLIANCE THEREWITH; (II) HOW OFTEN SUCH PERSON(S) SHOULD TAKE SUCH STEP(S); AND (III) HOW SUCH STEPS ARE DOCUMENTED. THIS CONDUCT VIOLATED CHAPTER V, RULES 5.1, 5.3, AND 5.4 OF THE BZX EXCHANGE RULES. Status: Final Sanction Detail: CENSURED, FINE OF $20,000 AND UNDERTAKING TO REVISE THE WSP'S Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND FEBRUARY 28, 2011, THE FIRM FAILED TO REPORT NUMEROUS REPORTABLE OPTIONS POSITIONS BECAUSE THE FIRM HAD FAILED TO PROPERLY AGGREGATE AND REPORT POSITIONS TO THE OPTIONS CLEARING CORPORATION (OCC) LARGE OPTIONS POSITIONS REPORT (LOPR) FOR APPROXIMATELY 39 ACCOUNTS RELATED TO FIVE ACTING IN CONCERT (AIC) GROUPS THAT ACTED IN CONCERT. THIS CONDUCT VIOLATED CHAPTER XVIII, SECTION 18.10 OF THE BZX EXCHANGE RULES. DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND FEBRUARY 28, 2011, THE FIRM FAILED TO HAVE AN ADEQUATE SUPERVISORY SYSTEM IN PLACE TO ENSURE THE ACCURACY AND COMPLETENESS OF THE REPORTING OF ITS OPTIONS POSITIONS, INCLUDING IN-CONCERT REPORTING, TO THE LOPR. THIS CONDUCT VIOLATED CHAPTER XVIII, RULE 18.2(A)(1) OF THE BZX EXCHANGE RULES. DURING THE PERIOD BETWEEN JANUARY 19, 2010 AND THE PRESENT, THE FIRM HAS FAILED TO HAVE ADEQUATE WRITTEN SUPERVISORY PROCEDURES (WSPS) REGARDING IN-CONCERT REPORTING TO THE LOPR AND TO ENSURE THE ACCURACY AND COMPLETENESS OF ITS DAILY LOPR SUBMISSIONS. SPECIFICALLY, THE FIRM'S WSPS FAIL TO REFLECT: (I) THE STEP(S) THAT THE FIRM'S DESIGNATED PERSON RESPONSIBLE TO ENSURE COMPLIANCE WITH APPLICABLE RULES SHOULD TAKE TO ENSURE COMPLIANCE THEREWITH; (II) HOW OFTEN SUCH PERSON(S) SHOULD TAKE SUCH STEP(S); AND (III) HOW SUCH STEPS ARE DOCUMENTED. THIS CONDUCT VIOLATED CHAPTER V, RULES 5.1, 5.3, AND 5.4 OF THE BZX EXCHANGE RULES.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT TRANSMITTED TO OATS REPORTS THAT CONTAINED INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA. THE FINDINGS STATED THAT SPECIFICALLY, THE FIRM SUBMITTED REPORTS WITH INACCURATE "LVS QTY", FAILED TO SUBMIT ROUTE REPORTS, SUBMITTED AN ORDER EXECUTION REPORT FOR AN AGENCY ROUTED ORDER, SUBMITTED AN INACCURATE ORDER RECEIPT TIME, FAILED TO SUBMIT ORDER INFORMATION, AND FAILED TO SUBMIT THE APPROPRIATE ACCOUNT TYPE CODE. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO PROPERLY MEMORIALIZE OATS ORDER INFORMATION ON THE MEMORANDA OF BROKERAGE ORDERS. SPECIFICALLY, THE FIRM FAILED TO MEMORIALIZE IMMEDIATE OR CANCEL, OR INTERMARKET SWEEP ORDER SPECIAL HANDLING CODES, THE PEG SPECIAL HANDLING CODE, AND THE CUSTOMER INSTRUCTIONS REGARDING DISPLAYING THE LIMIT ORDER ON THE ORDER TICKET. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING RELEVANT INFORMATION TO ITS CUSTOMERS. SPECIFICALLY, THE FIRM FAILED TO DISCLOSE THAT THE TRANSACTIONS WERE EXECUTED AT AVERAGE PRICES, THAT TRANSACTION DETAILS WERE AVAILABLE UPON REQUEST, ITS CAPACITY IN THE TRANSACTIONS, AND THAT IT CHARGED COMMISSIONS OR COMMISSION EQUIVALENTS. FINRA FOUND THAT THE FIRM'S SUPERVISORY SYSTEM FAILED TO PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO SEC RULE 204. SPECIFICALLY, THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) DID NOT INCLUDE THE IDENTIFICATION OF THE PERSON RESPONSIBLE FOR SUPERVISION, THE SUPERVISORY STEPS AND REVIEWS TO BE TAKEN BY THE APPROPRIATE SUPERVISOR, THE FREQUENCY OF THE SUPERVISORY REVIEWS, AND HOW THE SUPERVISORY REVIEWS SHOULD BE DOCUMENTED. Status: Final Sanction Detail: CENSURE AND FINE OF $20,000 Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT TRANSMITTED TO OATS REPORTS THAT CONTAINED INACCURATE, INCOMPLETE, OR IMPROPERLY FORMATTED DATA. THE FINDINGS STATED THAT SPECIFICALLY, THE FIRM SUBMITTED REPORTS WITH INACCURATE "LVS QTY", FAILED TO SUBMIT ROUTE REPORTS, SUBMITTED AN ORDER EXECUTION REPORT FOR AN AGENCY ROUTED ORDER, SUBMITTED AN INACCURATE ORDER RECEIPT TIME, FAILED TO SUBMIT ORDER INFORMATION, AND FAILED TO SUBMIT THE APPROPRIATE ACCOUNT TYPE CODE. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO PROPERLY MEMORIALIZE OATS ORDER INFORMATION ON THE MEMORANDA OF BROKERAGE ORDERS. SPECIFICALLY, THE FIRM FAILED TO MEMORIALIZE IMMEDIATE OR CANCEL, OR INTERMARKET SWEEP ORDER SPECIAL HANDLING CODES, THE PEG SPECIAL HANDLING CODE, AND THE CUSTOMER INSTRUCTIONS REGARDING DISPLAYING THE LIMIT ORDER ON THE ORDER TICKET. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING RELEVANT INFORMATION TO ITS CUSTOMERS. SPECIFICALLY, THE FIRM FAILED TO DISCLOSE THAT THE TRANSACTIONS WERE EXECUTED AT AVERAGE PRICES, THAT TRANSACTION DETAILS WERE AVAILABLE UPON REQUEST, ITS CAPACITY IN THE TRANSACTIONS, AND THAT IT CHARGED COMMISSIONS OR COMMISSION EQUIVALENTS. FINRA FOUND THAT THE FIRM'S SUPERVISORY SYSTEM FAILED TO PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO SEC RULE 204. SPECIFICALLY, THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) DID NOT INCLUDE THE IDENTIFICATION OF THE PERSON RESPONSIBLE FOR SUPERVISION, THE SUPERVISORY STEPS AND REVIEWS TO BE TAKEN BY THE APPROPRIATE SUPERVISOR, THE FREQUENCY OF THE SUPERVISORY REVIEWS, AND HOW THE SUPERVISORY REVIEWS SHOULD BE DOCUMENTED.

Allegations: THE DEPARTMENT OF MARKET REGULATION OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY ("FINRA"), ON BEHALF OF BATS EXCHANGE, INC. ("BATS", "BZX", OR THE "EXCHANGE"), ALLEGES: THE FIRM COMMITTED EGREGIOUS AND SYSTEMIC SUPERVISORY VIOLATIONS IN ITS BUSINESS OF PROVIDING DIRECT MARKET ACCESS AND SPONSORED ACCESS (TOGETHER "MARKET ACCESS") TO BROKER-DEALERS AND NON-REGISTERED MARKET PARTICIPANTS ("MARKET ACCESS CUSTOMERS") TO MULTIPLE MARKET CENTERS, INCLUDING BZX. WITHOUT DEDICATING SUFFICIENT RESOURCES TO ENSURE APPROPRIATE REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY SYSTEMS AND PROCEDURES, WEDBUSH ENABLED ITS MARKET ACCESS CUSTOMERS TO FLOOD THE EXCHANGES WITH THOUSANDS OF POTENTIALLY MANIPULATIVE WASH TRADES, AND OTHER POTENTIALLY MANIPULATIVE TRADING ACTIVITY, SUCH AS LAYERING AND SPOOFING. WEDBUSH REAPED MILLIONS OF DOLLARS FROM ITS MARKET ACCESS BUSINESS, BUT FAILED TO DEVOTE SUFFICIENT RESOURCES, INCLUDING QUALIFIED AND ADEQUATELY TRAINED COMPLIANCE PERSONNEL, SURVEILLANCE SYSTEMS AND CONTROLS, TO DETECT AND PREVENT POTENTIAL MANIPULATIVE ACTIVITY BY ITS MARKET ACCESS CUSTOMERS. THE FIRM FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE SUPERVISORY SYSTEMS AND PROCEDURES THAT WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECURITIES LAWS, RULES AND REGULATIONS, INCLUDING BZX RULES, ADDRESSING THE MONITORING, DETECTION, AND PREVENTION OF SUSPICIOUS AND POTENTIALLY MANIPULATIVE TRADING. THE FIRM ALSO FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNED TO MANAGE THE REGULATORY AND OTHER RISKS OF HAVING AND PROVIDING MARKET ACCESS. THE FIRM CREATED INCENTIVES THAT REWARDED COMPLIANCE PERSONNEL WITH MONTHLY COMPENSATION BASED ON MARKET ACCESS CUSTOMERS' TRADING VOLUME, FOR WHICH THEY HAD RESPONSIBILITY TO OVERSEE, AND FAILED TO MONITOR AND DETECT THOUSANDS OF INSTANCES OF POTENTIALLY MANIPULATIVE TRADING BY RECIDIVIST CUSTOMERS, DESPITE REPEATED RED FLAGS. AS A RESULT OF ITS CONDUCT, THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 15C3-5 THEREUNDER AND VIOLATED BZX RULES 3.1, 5.1 AND 5.4. Status: Final Sanction Detail: CENSURE AND FINE OF $566,666 Summary: AN OFFER OF SETTLEMENT AND CONSENT ENTERED INTO BETWEEN FINRA'S DEPARTMENT OF MARKET REGULATION ON BEHALF OF BATS Z-EXCHANGE AND WEDBUSH SECURITIES, INC. THE OFFER OF SETTLEMENT AND CONSENT WAS SUBMITTED FOR THE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERENCED IN THE OFFER. THE OFFER WAS SUBMITTED IN CONJUNCTION WITH THE SETTLEMENTS OF THREE OTHER DISCIPLINARY ACTIONS FINRA BROUGHT AGAINST WEDBUSH ON BEHALF OF FINRA AND TWO OTHER SELF-REGULATORY ORGANIZATIONS, WHICH DISCIPLINARY ACTIONS INCLUDE SUBSTANTIALLY THE SAME ALLEGATIONS AND CHARGES AS THOSE IN THE COMPLAINT IN THIS ACTION. THE FIRM IS CENSURED AND FINED $566,666. THE FIRM SETTLED THE RELATED FINRA AND EXCHANGE COMPLAINTS FOR A TOTAL FINE OF $1,800,000, WHICH IS ALLOCATED AS FOLLOWS: $566,666 EACH TO NYSE ARCA, BATS EXCHANGE, INC., AND NASDAQ, AND $100,002 TO FINRA. IN SETTING THE FINE AMOUNT, THE PARTIES TOOK INTO CONSIDERATION THAT THE FIRM PAID $2.44 MILLION TO THE SECURITIES AND EXCHANGE COMMISSION AND AGREED TO HIRE AN INDEPENDENT CONSULTANT IN SETTLEMENT OF SIMILAR CLAIMS.

Allegations: THE DEPARTMENT OF MARKET REGULATION OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA), ON BEHALF OF NYSE REGULATION, INC., ALLEGES: THE FIRM COMMITTED EGREGIOUS AND SYSTEMIC SUPERVISORY VIOLATIONS IN ITS BUSINESS OF PROVIDING MARKET ACCESS TO BROKER-DEALERS AND NON-REGISTERED MARKET PARTICIPANTS (MARKET ACCESS CUSTOMERS) TO MULTIPLE MARKET CENTERS, INCLUDING THE NYSE ARCA MARKETPLACE. WITHOUT DEDICATING SUFFICIENT RESOURCES TO ENSURE APPROPRIATE REGULATORY RISK MANAGEMENT CONTROLS AND SUPERVISORY SYSTEMS AND PROCEDURES, WEDBUSH ENABLED ITS MARKET ACCESS CUSTOMERS TO FLOOD THE EXCHANGES WITH THOUSANDS OF POTENTIALLY MANIPULATIVE WASH TRADES, AND OTHER POTENTIALLY MANIPULATIVE TRADING ACTIVITY, SUCH AS LAYERING AND SPOOFING. WEDBUSH REAPED MILLIONS OF DOLLARS FROM ITS MARKET ACCESS BUSINESS, BUT FAILED TO DEVOTE SUFFICIENT RESOURCES, INCLUDING QUALIFIED AND ADEQUATELY TRAINED COMPLIANCE PERSONNEL, SURVEILLANCE SYSTEMS AND CONTROLS, TO DETECT AND PREVENT POTENTIAL MANIPULATIVE ACTIVITY BY ITS MARKET ACCESS CUSTOMERS. THE FIRM FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE SUPERVISORY SYSTEMS AND PROCEDURES THAT WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECURITIES LAWS, RULES AND REGULATIONS, INCLUDING NYSE ARCA EQUITIES RULES ADDRESSING THE MONITORING, DETECTION, AND PREVENTION OF SUSPICIOUS AND POTENTIALLY MANIPULATIVE TRADING. THE FIRM ALSO FAILED TO ESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNED TO MANAGE THE REGULATORY AND OTHER RISKS OF HAVING AND PROVIDING MARKET ACCESS AND FAILED TO HAVE REASONABLE PROCEDURES TO ENSURE THAT ALL AUTHORIZED TRADERS OF ITS MARKET ACCESS CUSTOMERS COMPLY WITH ALL NYSE ARCA EQUITIES RULES. THE FIRM CREATED INCENTIVES THAT REWARDED COMPLIANCE PERSONNEL WITH MONTHLY COMPENSATION BASED ON MARKET ACCESS CUSTOMERS' TRADING VOLUME, FOR WHICH THEY HAD RESPONSIBILITY TO OVERSEE, AND FAILED TO MONITOR AND DETECT THOUSANDS OF INSTANCES OF POTENTIALLY MANIPULATIVE TRADING BY RECIDIVIST CUSTOMERS, DESPITE REPEATED RED FLAGS. THE FIRM FAILED TO USE DUE DILIGENCE TO LEARN ESSENTIAL FACTS RELATIVE TO MARKET ACCESS CUSTOMER ACCOUNTS AND FAILED TO PERIODICALLY REVIEW MARKET ACCESS CUSTOMER ACCOUNTS FOR IRREGULARITIES. THE FIRM ALSO FAILED TO TAKE REASONABLE STEPS TO AVOID SUBMISSION BY ITS MARKET ACCESS CUSTOMERS OF ORDERS THAT RESULTED IN LOCKED AND CROSSED MARKETS AND FAILED TO REASONABLY SUPERVISE ACTIVITY BY ITS MARKET ACCESS CUSTOMERS WITH RESPECT TO LOCKED AND CROSSED MARKETS, ORDER PROTECTION RULES AND COMPLIANCE WITH NYSE ARCA EQUITIES RULE 7.37(E)(2) AND REGULATION NMS RULE 611(C). AS A RESULT OF ITS CONDUCT, THE FIRM WILLFULLY VIOLATED SECTION 15(C)(3) OF THE SECURITIES EXCHANGE ACT OF 1934 AND MARKET ACCESS RULE 15C3-5 AND REGULATION NMS RULE 611(C) AND VIOLATED NYSE ARCA EQUITIES RULES 6.1(B), 6.18, 6.18(A)-(C), 6.2, 7.30(B), 7.37(E)(2), 9.2(A), 9.2(B), 9.2(B)(4) AND 2010. Status: Final Sanction Detail: CENSURE AND FINE OF $566,666 Summary: A HEARING OFFICER AT FINRA CONSIDERED AN OFFER OF SETTLEMENT AND CONSENT ENTERED INTO BETWEEN FINRA'S DEPARTMENT OF MARKET REGULATION ON BEHALF OF NYSE REGULATION, INC. AND WEDBUSH SECURITIES, INC. THE OFFER OF SETTLEMENT AND CONSENT WAS SUBMITTED FOR THE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERENCED IN THE OFFER. THE OFFER WAS SUBMITTED IN CONJUNCTION WITH THE SETTLEMENTS OF THREE OTHER DISCIPLINARY ACTIONS FINRA BROUGHT AGAINST WEDBUSH ON BEHALF OF FINRA AND TWO OTHER SELF-REGULATORY ORGANIZATIONS, WHICH DISCIPLINARY ACTIONS INCLUDE SUBSTANTIALLY THE SAME ALLEGATIONS AND CHARGES AS THOSE IN THE COMPLAINT IN THIS ACTION. THE FIRM IS CENSURED AND FINED $566,666. THE FIRM SETTLED THE RELATED FINRA AND EXCHANGE COMPLAINTS FOR A TOTAL FINE OF $1,800,000, WHICH IS ALLOCATED AS FOLLOWS: $566,666 EACH TO NYSE ARCA, BATS EXCHANGE, INC., AND NASDAQ, AND $100,002 TO FINRA. IN SETTING THE FINE AMOUNT, THE PARTIES TOOK INTO CONSIDERATION THAT THE FIRM PAID $2.44 MILLION TO THE SECURITIES AND EXCHANGE COMMISSION AND AGREED TO HIRE AN INDEPENDENT CONSULTANT IN SETTLEMENT OF SIMILAR CLAIMS.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SERVED AS THE CLEARING FIRM FOR A CORRESPONDENT BROKER-DEALER (THE CLIENT BROKER-DEALER) THAT WAS ENGAGED IN THE TRADING OF VARIOUS EXCHANGE-TRADED FUNDS (ETFS). THE FINDINGS STATED THAT THE FIRM'S CLIENT BROKER-DEALER ENGAGED IN A SYSTEMIC, RECURRING AND CYCLICAL PATTERN OF 'NAKED' REDEMPTION AND SHORT SALE TRADING ACTIVITY IN ETFS THAT RESULTED IN SUBSTANTIAL, REPEATED FAILURES TO DELIVER THE ETFS BY THE FIRM WITHIN THE CONTINUOUS NET SETTLEMENT SYSTEM (CNS). THE FIRM ALLOCATED THE FAILS TO DELIVER ASSOCIATED WITH THE FOREGOING REDEMPTION AND TRADING ACTIVITY TO THE CLIENT BROKER-DEALER, WHICH, UPON RECEIVING BUY-IN NOTICES, THE CLIENT BROKER-DEALER TYPICALLY TOOK ACTION TO CLOSE OUT THE FAIL BY SUBMITTING AN ORDER TO CREATE UNITS IN THE ETFS ON T+6, EVEN THOUGH ITS REDEMPTION AND SHORT SALE ACTIVITIES THAT RESULTED IN THE FAILS TO DELIVER DID NOT QUALIFY AS BONA FIDE MARKET MAKING UNDER RULE 204 OF REGULATION SHO. IN ADDITION, THE CLIENT BROKER-DEALER WOULD TYPICALLY RE-ESTABLISH THE FAIL POSITION BY REDEEMING SHARES OF THE ETF THROUGH THE FIRM, OR EXECUTING SALES OF THE ETF THAT CLEARED THROUGH THE FIRM THE NEXT TRADING DAY. THE EXTENT AND MAGNITUDE OF THE CLIENT BROKER-DEALER'S NAKED REDEMPTION/SHORT SELLING IN THE SUBJECT ETFS WAS SIGNIFICANT. THE CLIENT BROKER-DEALER SUBMITTED AT LEAST 255 NAKED REDEMPTION ORDERS THROUGH THE FIRM IN 11 OF THE 14 ETFS INCLUDED IN THE REVIEW, TOTALING 295,950,000 SHARES FOR WHICH THE CLIENT BROKER-DEALER WAS NOT LONG THE REQUISITE NUMBER OF SHARES OF THE ETF AND OTHERWISE DID NOT HAVE THE FULL LEGAL AUTHORITY AND LEGAL AND BENEFICIAL RIGHT TO TENDER THOSE SHARES AT THE TIME THE CLIENT BROKER-DEALER SUBMITTED ITS REDEMPTION ORDERS. THE CLIENT BROKER-DEALER'S CHRONIC FAILS TO DELIVER IN ETF SHARES RESULTING FROM ITS ABOVE NAKED REDEMPTION/TRADING STRATEGY ALSO CONSTITUTED A SIGNIFICANT FACTOR IN THE 14 ETFS UNDER REVIEW BEING CLASSIFIED AS THRESHOLD SECURITIES UNDER REGULATION SHO FOR SUSTAINED TIMEFRAMES. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ASCERTAIN WHETHER THE CLIENT BROKER-DEALER BENEFICIALLY OWNED SUFFICIENT ETF SHARES TO COVER ITS REDEMPTION REQUESTS. IN FACT, THE FIRM WAS AWARE, OR SHOULD HAVE BEEN AWARE, THAT THE CLIENT BROKER-DEALER ROUTINELY WAS PLACING ETF REDEMPTION ORDERS WITH THE FIRM WHEN IT WAS INSUFFICIENTLY LONG THE ETF SHARES, RESULTING IN REPEATED FAILS TO DELIVER CONSISTENT WITH THE CLIENT BROKER-DEALER'S STRATEGY TO MAINTAIN A SHORT POSITION IN ETFS. IN ADDITION, THE FIRM FAILED TO ADEQUATELY FOLLOW UP ON THE CLIENT BROKER-DEALER'S REPEATED FAILS TO DELIVER THAT RESULTED FROM ITS CYCLICAL, REPETITIVE PATTERN OF NAKED REDEMPTION ORDERS AND SHORT SALES OF ETFS IN THE SECONDARY MARKET TO IDENTIFY AND TAKE STEPS TO ADDRESS THE MISCONDUCT. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH, IMPLEMENT AND ENFORCE REASONABLE SUPERVISORY PROCEDURES, INCLUDING WRITTEN SUPERVISORY PROCEDURES, DURING THE REVIEW PERIOD SPECIFIC TO COMPLIANCE WITH RULE 204 OF REGULATION SHO, OR SPECIFIC TO THE FIRM'S ACTIVITIES AS AN AUTHORIZED PARTICIPANT IN CERTAIN ETFS, TO REASONABLY ENSURE THOSE ACTIVITIES COMPLIED WITH APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS. AS A RESULT OF ITS CONDUCT, THE FIRM VIOLATED NASDAQ RULES 2110 AND 3010, AND VIOLATED NASDAQ RULE 2110 BY FACILITATING ITS CLIENT BROKER-DEALER'S VIOLATIONS OF RULE 204 OF REGULATION SHO. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $337,500 SHALL BE PAID TO NASDAQ AND UNDERTAKES TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES. Summary: THE FIRM WAS CENSURED, FINED $337,500 SHALL BE PAID TO NASDAQ AND UNDERTAKES TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SERVED AS THE CLEARING FIRM FOR A CORRESPONDENT BROKER-DEALER THAT WAS ENGAGED IN THE TRADING OF VARIOUS EXCHANGE-TRADED FUNDS (ETFS) AND THE FIRM WAS AN AUTHORIZED PARTICIPANT OF VARIOUS ETFS. THE FINDINGS STATED THAT THE CLIENT BROKER-DEALER ENGAGED IN A SYSTEMIC, RECURRING AND CYCLICAL PATTERN OF 'NAKED' REDEMPTION AND SHORT SALE TRADING ACTIVITY IN ETFS THAT RESULTED IN SUBSTANTIAL, REPEATED FAILURES TO DELIVER THE ETFS BY THE FIRM WITHIN THE CONTINUOUS NET SETTLEMENT SYSTEM. THE EXTENT AND MAGNITUDE OF THE CLIENT BROKER-DEALER'S NAKED REDEMPTION/SHORT SELLING IN THE SUBJECT ETFS WAS SIGNIFICANT. THE FIRM FAILED TO ASCERTAIN WHETHER THE CLIENT BROKER-DEALER BENEFICIALLY OWNED SUFFICIENT ETF SHARES TO COVER ITS REDEMPTION REQUESTS. IN FACT, THE FIRM WAS AWARE, OR SHOULD HAVE BEEN AWARE, THAT THE CLIENT BROKER-DEALER ROUTINELY WAS PLACING ETF REDEMPTION ORDERS WITH THE FIRM WHEN IT WAS INSUFFICIENTLY LONG THE ETF SHARES, RESULTING IN REPEATED FAILS TO DELIVER CONSISTENT WITH THE CLIENT BROKER-DEALER'S STRATEGY TO MAINTAIN A SHORT POSITION IN ETFS. IN ADDITION, THE FIRM FAILED TO ADEQUATELY FOLLOW UP ON THE CLIENT BROKER-DEALER'S REPEATED FAILS TO DELIVER THAT RESULTED FROM ITS CYCLICAL, REPETITIVE PATTERN OF NAKED REDEMPTION ORDERS AND SHORT SALES OF ETFS IN THE SECONDARY MARKET TO IDENTIFY AND TAKE STEPS TO ADDRESS THE MISCONDUCT. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH, IMPLEMENT AND ENFORCE REASONABLE SUPERVISORY PROCEDURES, INCLUDING WRITTEN SUPERVISORY PROCEDURES, DURING THE REVIEW PERIOD SPECIFIC TO COMPLIANCE WITH RULE 204 OF REGULATION SHO, OR SPECIFIC TO THE FIRM'S ACTIVITIES AS AN AUTHORIZED PARTICIPANT IN CERTAIN ETFS, TO REASONABLY ENSURE THOSE ACTIVITIES COMPLIED WITH APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS. WHILE THE FIRM MAINTAINED CERTAIN DESK PROCEDURES AND A CORPORATE POLICY CONCERNING CLOSE OUTS OF FAILS TO DELIVER AND PROCEDURES REGARDING THE PROCESSING OF ETF CREATION/REDEMPTION ORDERS DURING THE REVIEW PERIOD, THEY WERE OPERATIONAL IN NATURE. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES DID NOT ADDRESS EITHER RULE 204 OF REGULATION SHO OR THE FIRM'S ACTIVITIES AS AN AUTHORIZED PARTICIPANT AT ALL, LET ALONE PROVIDE FOR SUPERVISORY REVIEWS TO ENSURE FAILS WERE BEING APPROPRIATELY IDENTIFIED AND ADDRESSED, CLOSE-OUT PROCEDURES WERE BEING FOLLOWED AND FIRM PERSONNEL TASKED WITH CARRYING OUT THE FIRM'S OBLIGATIONS AND RESPONSIBILITIES AS AN AUTHORIZED PARTICIPANT WERE BOTH FAMILIAR WITH, AND CARRYING OUT, SUCH DUTIES CONSISTENT WITH THE FIRM'S AUTHORIZED PARTICIPANT AGREEMENTS AND APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS. THE FIRM FACILITATED ITS CLIENT BROKER-DEALER'S VIOLATIONS OF RULE 204 OF REGULATION SHO IN REPEATEDLY EFFECTUATING, AS AN AUTHORIZED PARTICIPANT AND CLEARING FIRM, THE CLIENT BROKER-DEALER'S NAKED REDEMPTION ORDERS AND ETF SHORT SELL ORDERS, WITHOUT CONDUCTING ADEQUATE INQUIRY INTO WHETHER THE CLIENT BROKER-DEALER OWNED OR HAD FULL LEGAL AUTHORITY AND LEGAL AND BENEFICIAL RIGHT TO REDEEM ETF SHARES AND TAKING SUFFICIENT FOLLOW-UP ACTIONS TO ADDRESS THE CLIENT BROKER-DEALER'S RECURRING, CYCLICAL FAILS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $337,500 TO BE PAID TO FINRA, AND UNDERTAKES TO REVISE THE FIRM'S WRITTEN SUPERVISORY PROCEDURES. Summary: THE FIRM WAS CENSURED AND FINED $337,500 TO BE PAID TO FINRA, AND UNDERTAKES TO REVISE THE FIRM'S WRITTEN SUPERVISORY PROCEDURES.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED, WITHIN 10 SECONDS AFTER EXECUTION, TO TRANSMIT LAST SALE REPORTS OF TRANSACTIONS IN NMS SECURITIES TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) AND FAILED TO REPORT THE CORRECT TIME OF EXECUTION TO THE FNTRF IN THAT IT FAILED TO APPEND THE STOP STOCK TIME ON LAST SALE REPORTS OF TRANSACTIONS IN NMS SECURITIES. THE FINDINGS STATED THAT THE FIRM FAILED TO ADEQUATELY SUPERVISE ITS TRADE REPORTING AND INPUT OF TRADE DATA TO THE FNTRF. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO A CENSURE AND FINE OF $20,000. Summary: THE FIRM WAS CENSURED AND FINED $20,000. THE FINE WAS PAID JANUARY 18 2017.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT FAILED TO REPORT INFORMATION REGARDING PURCHASE AND SALE TRANSACTIONS EFFECTED IN MUNICIPAL SECURITIES TO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) IN THE MANNER PRESCRIBED BY MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) RULE G-14 RTRS PROCEDURES AND THE RTRS USERS MANUAL. THE FINDINGS STATED THAT SPECIFICALLY, THE FIRM FAILED TO REPORT INFORMATION ABOUT SUCH TRANSACTIONS WITHIN 15 MINUTES OF TIME OF TRADE TO AN RTRS PORTAL. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ENFORCE ITS WRITTEN SUPERVISORY PROCEDURES (WSPS) CONCERNING TRADE REPORTING IN MUNICIPAL SECURITIES. SPECIFICALLY, THE FIRM DID NOT CONDUCT A "DAILY TO WEEKLY" REVIEW OF THE FIRM'S ORDER MANAGEMENT SYSTEM CANCEL AND LATE TRADE REPORTS AS STATED IN ITS WSPS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $20,000. Summary: ON 3/31/2017 THE FIRM WAS CENSURED AND FINED $20,000.

Allegations: NYSE ARCA ENFORCEMENT ALLEGED THAT: THE FIRM FAILED TO ESTABLISH AND MAINTAIN A REASONABLE SUPERVISORY SYSTEM AS TO THE FIRM'S FOUNDER AND FORMER PRESIDENT, AND CERTAIN ACCOUNTS THAT HE ACTIVELY TRADED ON BEHALF OF CUSTOMERS, HIMSELF, AND THE FIRM OR ITS AFFILIATES; THE FIRM CONTINUED TO ALLOW THE FOUNDER TO TRADE FOR THESE CUSTOMER ACCOUNTS ALONG WITH HIS PERSONAL AND PROPRIETARY ACCOUNTS, WITHOUT ADEQUATE PROCESS OR PROCEDURES IN PLACE TO SUPERVISE THE ORDER ENTRY, TRADE EXECUTIONS, OR TRADE ALLOCATIONS IN THESE ACCOUNTS; THE FOUNDER AND HIS TRADING ASSISTANT USED AN ORDER MANAGEMENT SYSTEM THAT WAS NOT FREQUENTLY USED BY OTHER MEMBERS OF THE FIRM; THE ORDER MANAGEMENT SYSTEM DID NOT PROVIDE THE ABILITY TO ASSIGN ORDERS TO SPECIFIC FIRM AFFILIATE ACCOUNTS BEFORE EXECUTION AND DID NOT INTERFACE DIRECTLY WITH THE FIRM'S BACK OFFICE SYSTEM; . THE FOUNDER'S TRADING ASSISTANT MANUALLY INPUTTED ACCOUNT ALLOCATIONS FOR TRADES EXECUTED BY HIM AFTER THE TRADES OCCURRED; THE METHOD FOR DETERMINING TRADE ALLOCATIONS FOR EXECUTED ORDERS IN THE AFFILIATE ACCOUNTS REMAINED UNDOCUMENTED AND UNAPPROVED BY THE FIRM, AND THERE CONTINUED TO BE NO INDEPENDENT MECHANISM AT THE FIRM TO ASSESS THE APPROPRIATENESS OF THE ALLOCATIONS; THE FOUNDER'S TRADING ACTIVITY PRESENTED CONFLICTS OF INTEREST, AND THESE CONFLICTS WERE COMPOUNDED BY THE FACT THAT THE FOUNDER REGULARLY ENGAGED IN DAY TRADING FOR HIS PERSONAL AND PROPRIETARY ACCOUNTS IN SOME OF THE SAME SECURITIES THAT HE TRADED ON BEHALF OF HIS CUSTOMERS. IN ADDITION, NYSE ALLEGED THAT AS A CONSEQUENCE OF FAILING TO ALLOCATE ORDERS ENTERED ON BEHALF OF THE AFFILIATE ACCOUNTS TO SPECIFIC ACCOUNTS PRIOR TO ORDER EXECUTION, THE FIRM CONTINUED TO INACCURATELY MARK A SUBSET OF PRINCIPAL ORDERS IN CERTAIN PROPRIETARY ACCOUNTS AS AGENCY. NYSE ACKNOWLEDGED THAT THE FIRM MADE EFFORTS TO PROVIDE DIRECT LINES OF SUPERVISION OVER THE FOUNDER, BUT ALLEGED THAT THESE EFFORTS WERE DELAYED AND DID NOT REASONABLY RESOLVE ALL OF THE ISSUES IDENTIFIED HEREIN. NYSE CHARGED THE FIRM WITH VIOLATIONS OF NYSE ARCA RULES 11.18, 11.1(B), AND 9.2010-E. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $500,000.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, WEDBUSH SECURITIES INC. ("WS") CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT WS NEGLIGENTLY MISREPRESENTED THE DEFAULT STATUS OF BONDS ON CUSTOMER ACCOUNT STATEMENTS. THE FINDINGS STATED THAT WS GENERATED AND DISTRIBUTED MORE THAN 19,600 MONTHLY ACCOUNT STATEMENTS TO CUSTOMERS THAT INACCURATELY REPRESENTED THAT MUNICIPAL OR CORPORATE BONDS HELD BY CUSTOMERS WERE MAKING INTEREST OR PRINCIPAL PAYMENTS, WHEN, IN FACT, THE BONDS WERE IN DEFAULT. IN EACH INSTANCE, WS RECEIVED NOTICE THAT THE BONDS IN QUESTION WERE IN DEFAULT, BUT WS DID NOT PROVIDE SUCH INFORMATION TO THE VENDOR WS USED TO MAINTAIN INFORMATION ABOUT SECURITIES HELD BY CUSTOMERS. BY MAKING NEGLIGENT MISREPRESENTATIONS AND MAKING AND PRESERVING INACCURATE ACCOUNT STATEMENTS, WS VIOLATED MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) RULES G-17 AND G-8. THE FINDINGS STATED THAT WS FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM REASONABLY DESIGNED TO REVIEW THE ACCURACY OF ACCOUNT STATEMENTS IT SENT TO CUSTOMERS. ALTHOUGH WS RECEIVED NOTICE WHEN BONDS HELD BY CUSTOMERS HAD DEFAULTED, WS DID NOT HAVE ANY SYSTEM TO VERIFY THAT SUCH INFORMATION WAS REFLECTED IN THE SYSTEM THE FIRM USED TO MAINTAIN INFORMATION ABOUT SECURITIES HELD BY CUSTOMERS. WS ALSO DID NOT HAVE A SYSTEM TO REVIEW ACCOUNT STATEMENTS TO DETERMINE WHETHER WS ACCURATELY REPORTED THE DEFAULT STATUS OF BONDS. WS FAILED TO DEVELOP SUCH SYSTEMS EVEN THOUGH WS WAS AWARE OF RED FLAGS THAT WS MAY HAVE BEEN REPORTING SUCH INFORMATION INCORRECTLY. WS DID NOT TAKE STEPS TO VERIFY THAT ACCOUNT STATEMENTS SENT TO CUSTOMERS ACCURATELY REPORTED THE DEFAULT STATUS OF BODS AND CONTINUED TO MISREPORT SUCH INFORMATION ON CUSTOMER ACCOUNT STATEMENTS UNTIL IT BEGAN TO REVISE PROCEDURES CONFERRING THE ACCURATE REPORTING OF THE DEFAULT STATUS OF BONDS ON ACCOUNT STATEMENTS. AS A RESULT, WS VIOLATED MSRB RULE G-27. THE FINDINGS ALSO INCLUDED THAT WS FAILED TO DELIVER REQUIRED ANNUAL PRIVACY NOTICES, MARGIN DISCLOSURES, AND ORDER EXECUTION DISCLOSURES. WS USED A THIRD-PARTY VENDOR TO PROVIDE ACCOUNT STATEMENTS TO CUSTOMERS VIA MAIL OR ELECTRONIC DELIVERY THROUGH WS'S ONLINE PLATFORM. WS WAS RESPONSIBLE FOR PROVIDING THE VENDOR WITH REQUIRED NOTICES AND DISCLOSURES TO INCLUDE WITH ACCOUNT STATEMENTS DELIVERED TO CUSTOMERS. HOWEVER, WS FAILED TO INSTRUCT THE VENDOR TO APPEND THE REQUIRED NOTICES AND DISCLOSURES TO THE ACCOUNT STATEMENTS SENT ELECTRONICALLY TO WS'S CUSTOMERS, AND AS A RESULT, WS FAILED TO DELIVER MORE THAN 400,000 REQUIRED NOTICES AND DISCLOSURES TO APPROXIMATELY 14,900 CUSTOMERS. FINRA FOUND THAT WS DID NOT HAVE A SUPERVISORY SYSTEM REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH ITS OBLIGATION TO DELIVER ANNUAL PRIVACY NOTICES, MARGIN DISCLOSURES, AND ORDER EXECUTION DISCLOSURES. WS'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED WS TO DELIVER THE ANNUAL PRIVACY NOTICES, MARGIN DISCLOSURES, AND ORDER EXECUTION DISCLOSURES DESCRIBED ABOVE TO CUSTOMERS ON AN ANNUAL BASIS. HOWEVER, WS DID NOT HAVE ANY SYSTEM TO VERIFY THAT SUCH NOTICES WERE SENT TO CUSTOMERS WHO ELECTED TO RECEIVE MATERIALS FROM WS VIA ITS ONLINE PLATFORM. INSTEAD, WS RELIED ON THE VENDOR TO DELIVER THE REQUIRED ANNUAL NOTICES AND DISCLOSURES TO CUSTOMERS, BUT WS DID NOT TAKE ANY STEPS TO VERIFY THAT THE VENDOR HAD APPENDED THE REQUIRED NOTICES AND DISCLOSURE TO THE ACCOUNT STATEMENTS SENT ELECTRONICALLY TO CUSTOMERS. WS LATER IDENTIFIED THAT CUSTOMERS HAD NOT BEEN RECEIVING THE REQUIRED NOTICES AND DISCLOSURES, IMPLEMENTED CHANGES TO THE DELIVERY PROCESS, AND SELF-REPORTED THE ISSUE TO FINRA. SUBSEQUENTLY, WS REVISED THE POLICIES TO REQUIRE FIRM PERSONNEL TO VALIDATE THAT THE REQUIRED ANNUAL NOTICES AND DISCLOSURES HAD BEEN DELIVERED TO CUSTOMERS. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $850,000, AND REQUIRED TO CERTIFY THAT THE FIRM'S WSPS AND SUPERVISORY SYSTEM ARE REASONABLY DESIGNED TO REVIEW THE ACCURACY OF ACCOUNT STATEMENTS SENT TO CUSTOMERS AND TO ACHIEVE COMPLIANCE WITH ITS OBLIGATION TO DELIVER TO CUSTOMERS ANNUAL PRIVACY NOTICES, MARGIN DISCLOSURES, AND ORDER EXECUTION DISCLOSURES.

Allegations: FAILING TO REPORT REGULATORY ACTIONS TO THE COLORADO DIVISION OF INSURANCE DURING THE PERIOD 2004-2010 IN VIOLATION OF 10-2-801(1)(A) AND 10-2-801(3), C.R.S. Status: Final Sanction Detail: $14,300 FINE PAID VIA A CHECK ISSUED MAY 4, 2011. Summary: THE FIRM WITHOUT ADMITTING OR DENYING THE ALLEGATIONS STIPULATED TO THE ORDER ISSUED APRIL 18, 2011 IMPOSING A FINE OF $14,300.

Allegations: SEC RULES 10B-10, 605 OF REGULATION NMS, NASD RULES 2110, 6230(A) AND (C)(8), 6955(A) - WEDBUSH SECURITIES INC. FAILED TO REPORT TO THE TRADE REPORTING AND COMPLIANCE ENGINE (TRACE) TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES WITHIN 15 MINUTES OF EXECUTION TIME AND FAILED TO REPORT TO TRACE THE CORRECT TRADE TIME FOR TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES. THIS CONDUCT CONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF NASD RULES 6230(A) AND (C)(8) AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUT EXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF NASD RULE 2110. THE FIRM TRANSMITTED TO THE ORDER AUDIT TRAIL SYSTEM (OATS) REPORTS THAT CONTAINED INACCURATE, INCOMPLETE OR IMPROPERLY FORMATTED DATA; THE FIRM INCORRECTLY REPORTED THE ORDER TYPE CODE; FAILED TO SUBMIT A ROUTE REPORT, REPORTED AN INCORRECT ORDER ENTRY TIME AND INCORRECTLY SUBMITTED A CANCELLATION FLAG. THE FIRM PROVIDED INCORRECT WRITTEN INFORMATION TO ITS CUSTOMERS; THE FIRM FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMER ITS CORRECT CAPACITY IN TRANSACTIONS; WHEN IT ACTED AS PRINCIPAL FOR ITS OWN ACCOUNT, IT FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMER THE CORRECT REPORTED TRADE PRICE; AND FAILED TO PROVIDE WRITTEN NOTIFICATION DISCLOSING TO ITS CUSTOMER ITS CORRECT CAPACITY IN TRANSACTIONS AND THE CORRECT REPORTED TRADE PRICE. THE FIRM MADE AVAILABLE A REPORT ON THE COVERED ORDERS IN NATIONAL MARKET SYSTEM SECURITIES IT RECEIVED FOR EXECUTION FROM ANY PERSON AND FOR ONE MONTH, THE REPORT INCLUDED INCORRECT INFORMATION AS TO THE NUMBER OF COVERED ORDERS EXECUTED BY THE FIRM. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED AND FINED $28,000.

Allegations: THE CONNECTICUT INSURANCE DEPT. ALLEGED THAT WEDBUSH FAILED TO NOTIFY THE INSURANCE DEPT. OF ADMINISTRATIVRE ACTIONS AGAINST THE FIRM THAT HAD BEEN REPORTED ON CRD. Status: Final Sanction Detail: THE FIRM PAID A FINE OF $1,500.00 ON DEC. 28, 2010. Summary: WEDBUSH NEITHER ADMITTED OR DENIED THE ALLEGATIONS BUT AGREED TO PAY THE $1,500 FINE ON DEC 28, 2010.

Allegations: ON JUNE 20, 2007 AND JULY 31, 2009 THE FIRM FAILED TO INCLUDE THE ADMINISTRATIVE ACTIONS ON CRD ON THE NY INSURANCE LICENSE APPLICATION. Status: Final Sanction Detail: THE FIRM PAID A FINE OF $10,000 WHICH WAS SENT WITH THE PROPOSED STIPULATION ON NOVEMBER 13, 2012. Summary: THE FIRM SENT A SIGNED COPY OF THE STIPULATION ADMITTING THE FIRM HAD NOT PROVIDED INFORMATION REGARDING THE ADMINISTRATIVE ACTIONS ON THE 2007 AND 2009 APPLICATIONS ALONG WITH THE CHECK TO PAY THE $10,000 PENALTY. NY SIGNED THE STIPULATION AND SENT THE FIRM A COPY ON MARCH 8 2013.

Allegations: STATE OF GEORGIA ALLEGED THAT WMS AND AGENT EFFECT TWO SALES TRANSACTIONS WHILE THE AGENT WAS NOT REGISTERED WITH THE STATE. Status: Final Sanction Detail: MATTER WAS RESOLVED BY WMS AND THE AGENT AGREEING TO AN ORDER TO PROHIBITION AND SETTLEMENT AND REIMBURSEMENT TO THE STATE OF THEIR $1,250.00 COSTS. Summary: STATE OF GEORGIA ALLEGED THAT WMS AND AGENT EFFECTED TWO SALES TRANSACTIONS WHILE THE AGENT WAS NOT REGISTERED WITH THE STATE. MATTER WAS RESOLVED BY WMS AND THE AGENT AGREEING TO AN ORDER TO PROHIBITION AND SETTLEMENT AND REIMBURSEMENT TO THE STATE OF THEIR $1,250.00 COSTS.

Allegations: STATE OF WASHINGTON ALLEGES WEDBUSH FROM OFFERING UNREGISTERED SECURITIES IN VIOLATION OF RCW 21.20.140 BY ITS POLICY OF PAYING INTEREST ON ITS CUSTOMERS' FREE CREDIT BALANCES. Status: Final Sanction Detail: WMS AND ITS AGENTS WILL NOT ENGAGE IN THE GENERAL SOLICITATION OF CUSTOMERS BY ADVERTISEMENT OF ITS INTEREST PAYMENT POLICY NOR USE SAID INTEREST PAYMENT POLICY AS AN INDUCEMENT TO A PROSPECTIVE CUSTOMER. WEDBUSH WILL INCLUDE WITH CURRENT PERIODIC STATEMENTS REASONABLE PERFUNCTORY NOTICE DESCRIBING ITS INTEREST PAYMENT POLICY. Summary: IN 1976 WEDBUSH ADVERTISED IN THE STATE OF WASHINGTON THAT IT PAID INTEREST ON CUSTOMER'S BALANCES INTENDED FOR RE-INVESTMENT. THE STATE OF WASHINGTON DEEMED THIS ADVERTISING AS AN OFFERING OF UNREGISTERED SECURITIES. ON JANUARY 23, 1978, THE STATE AND FIRM ENTERED INTO A STIPULATION THAT THE FIRM WILL NOT ENGAGED IN THE GENERAL SOLICITATION OF CUSTOMERS BY ADVERTISING OF ITS INTEREST PAYMENT POLICY AND WILL INCLUDE WITH CURRENT CUSTOMER PERIODIC STATEMENTS REASONABLE PERFUNCTORY NOTICE DESCRIBING ITS INTEREST PAYMENT POLICY.

Allegations: WMS'S PREDECESSOR, WEDBUSH, NOBLE, COOK INC., WAS SUBJECT OF A CEASE AND DESIST ORDER. WEDBUSH HAD FAILED TO INCLUDE IN ITS REGISTRATION RENEWAL PACKET A COPY OF ITS LATEST AUDITED FINANCIAL STATEMENT AND A CHECK IN THE AMOUNT OF $70.00. WMS'S APPLICATION FOR RENEWAL HAD ALSO INCLUDED APPLICATION FOR TWO EMPLOYEES WHO WERE DOMICILED IN COLORADO BUT INADVERTENTLY HAD FAILED TO HAVE THEIR SIGNATURES NOTARIZED. Status: Final Sanction Detail: AS A RESULT OF THESE INADVERTENT FAILURES TO INCLUDE ALL THE NECESSARY DOCUMENTS, THE STATE OF COLORADO ISSUED A CEASE AND DESIST ORDER UNTIL SUCH DOCUMENTS WERE SUBMITTED AND PROPERLY NOTARIZED. WMS PROVIDED DOCUMENTS AND PAID A FINE OF $2,000.00 ON 3/14/1978. Summary: WMS'S PREDECESSOR, WEDBUSH, NOBLE, COOK INC., WAS SUBJECT OF A CEASE AND DESIST ORDER. WEDBUSH HAD FAILED TO INCLUDE IN ITS REGISTRATION RENEWAL PACKET A COPY OF ITS LATEST AUDITED FINANCIAL STATEMENT AND A CHECK IN THE AMOUNT OF $70.00. WMS'S APPLICATION FOR RENEWAL HAD ALSO INCLUDED APPLICATION FOR TWO EMPLOYEES WHO WERE DOMICILED IN COLORADO BUT INADVERTENTLY HAD FAILED TO HAVE THEIR SIGNATURES NOTARIZED. DOCUMENTS WERE SUBMITTED AND FINE WAS PAID IN THE AMOUNT OF $2,000.00 ON 3/14/1978.

Allegations: WMS OFFERED AND SOLD SECURITIES IN STATE WITHOUT BROKER/DEALER AND AGENT REGISTRATION; OFFERED AND SOLD SECURITIES IN STATE WHICH SECURITIES WERE NOT REGISTERED OR EXEMPT; FAILED TO EXERCISE SUFFICIENT COMPLIANCE AND SUPERVISION OVER ITS AGENTS AND ACTIVITIES IN STATE. Status: Final Sanction Detail: WMS SUBMITTED BROKER/DEALER AND AGENT REGISTRATION APPLICATIONS AND PAID FINE OF $4,000.00 WITHIN TEN DAYS OF ORDER. Summary: WMS OFFERED AND SOLD SECURITIES IN STATE WITHOUT BROKER/DEALER AND AGENT REGISTRATION; OFFERED AND SOLD SECURITIES IN STATE WHICH SECURITIES WERE NOT REGISTERED OR EXEMPT; FAILED TO EXERCISE SUFFICIENT COMPLIANCE AND SUPERVISION OVER ITS AGENTS AND ACTIVITIES IN STATE. FIRM SUBMITTED APPLICATIONS AND PAID FINE OF $4,000.00 WITHIN TEN DAYS OF ORDER. IN 1988, THE FIRM ESTABLISHED AN AUTOMATED SYSTEM TO DETECT TRANSACTIONS IN STATE WHERE AGENTS ARE NOT REGISTERED. SINCE THE SYSTEM WAS IMPLEMENTED NO SIMILAR DISCIPLINARY ACTIONS HAVE OCCURRED.

Allegations: STATE OF OREGON ALLEGED THAT THREE AGENTS OF WMS WERE NOT PROPERLY REGISTERED TO CONDUCT BUSINESS IN OREGON. Status: Final Sanction Detail: DISPOSITION RESULTED IN A FINE OF $1000.00 OF WHICH WAS PAID IN JULY 1988. Summary: STATE OF OREGON ALLEGED THAT THREE AGENTS OF WMS WERE NOT PROPERLY REGISTERED TO CONDUCT BUSINESS IN STATE. WMS RESOLVED THE MATTER BY CONSENTING TO THE ENTRY OF A CEASE AND DESIST ORDER AND A FINE OF $1,000.00

Allegations: IA RELEASE 5386, SEPTEMBER 30, 2019: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED AGAINST WEDBUSH SECURITIES, INC. ("RESPONDENT"). ON THE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OF BREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THE RESPONDENT IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND THE FEES IT RECEIVED. AT TIMES DURING THE RELEVANT PERIOD, RESPONDENT PURCHASED, RECOMMENDED, OR HELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THAT CHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THE SAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. RESPONDENT RECEIVED 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS. RESPONDENT FAILED TO DISCLOSE IN ITS FORM ADV OR OTHERWISE THE CONFLICTS OF INTEREST RELATED TO (A) ITS RECEIPT OF 12B-1 FEES, AND/OR (B) ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. DURING THE RELEVANT PERIOD, RESPONDENT RECEIVED 12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUAL FUND SHARE CLASSES. AS A RESULT OF THE CONDUCT, RESPONDENT WILLFULLY VIOLATED SECTION 206(2) OF THE ADVISERS ACT. Status: Final Sanction Detail: WEDBUSH SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT. WEDBUSH IS CENSURED, SHALL PAY DISGORGEMENT OF $1,703,194.38 AND PREJUDGMENT INTEREST OF $149,346.59, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. Summary: WEDBUSH HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE, AND IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN WEDBUSH'S OFFER. ACCORDINGLY, IT IS ORDERED THAT WEDBUSH SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT. RESPONDENT IS CENSURED, SHALL PAY DISGORGEMENT OF $1,703,194.38 AND PREJUDGMENT INTEREST OF $149,346.59, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. WEDBUSH SELF-REPORTED TO THE COMMISSION THE VIOLATIONS DISCUSSED IN THIS ORDER PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARE CLASS SELECTION DISCLOSURE INITIATIVE ("SCSD INITIATIVE"). ACCORDINGLY, THIS ORDER AND WEDBUSH'S OFFER ARE BASED ON THE INFORMATION SELF-REPORTED BY WEDBUSH. WEDBUSH ACKNOWLEDGES THAT THE COMMISSION IS NOT IMPOSING A CIVIL PENALTY BASED UPON WEDBUSH'S SELF-REPORT IN THE SCSD INITIATIVE.