Wedbush Securities has agreed to pay $850,000 in fines to settle Financial Industry Regulatory Authority (Finra) allegations that it falsified monthly customer statements for five years.

The Los Angeles-based wealth management, brokerage and clearing firm, which has 540 registered individuals in 40 branches nationwide, agreed to pay the fines and be subject to censure without admitting or denying the findings, according to a Nov. 3 settlement with Finra.

The firm “negligently misrepresented” monthly account statements that were sent to about 610 customers from 2013 to 2018 by reporting that 38 municipal and corporate bonds held by customers were making interest or principal payments, when they were actually in default, the regulatory organization said in the settlement.

While Wedbush received notice that the bonds were in default, the firm failed to provide such information to the vendor it used to maintain information about securities held by customers, Finra said.

“As a result, when Wedbush used data from that vendor to generate monthly account statements, those statements did not reflect that the bonds in question were in default and, instead, misrepresented that the bonds were making interest or principal payments,” Finra said in the settlement.

Finra also alleged that Wedbush did not reasonably review the accuracy of account statements it sent to customers, even after being notified by a vendor in 2016 that it was misreporting bond default information and that the monthly account statements sent by Wedbush to those customers inaccurately stated customers were receiving interest payments for their position.

“The firm continued to misreport such information on customer account statements until approximately December 2018,” after which Wedbush began to revise its procedures, Finra said.

Wedbush also allegedly failed to deliver order execution and margin disclosures and annual reports to about 14,900 customers from January 2010 through August 2020, according to the settlement.

Wedbush settled charges that it failed to establish and maintain a supervisory system to review the accuracy of information included on customer account, according to the settlement.

As part of the settlement, Wedbush agreed to pay the Municipal Securities Rulemaking Board $300,000 of the $850,000 for violations of its rules.

The firm did not immediately respond to a request for comment.