SEC Sues Glendale Brokerage

The Securities and Exchange Commission said it filed suit against W.S. Clearing, a Glendale-based brokerage that shut down Thursday after its capital evaporated. The SEC said it obtained a temporary restraining order in U.S. District Court in Los Angeles preventing W.S. Clearing and its principal, William Sedkey Saydein, from further violations of net capital and customer protection rules. W.S. isn’t a retail broker but rather processes trades for 15,000 accounts at 18 small brokerages nationwide, many of which deal in penny stocks. The firm’s abrupt shutdown caused turmoil in trading of some penny stocks on Thursday and Friday. The SEC said W.S. had a net capital deficit of at least $1.1 million, and that its reserve account, set aside for the protection of customers, had a deficit of $2.1 million. “Moreover, to conceal the deficit in its reserve account . . . W.S. executed unauthorized trades, and has misused at least $2.7 million of client funds,” the SEC alleged. Calls to W.S. went unanswered on Friday.