FINRA bars ex-Wedbush broker William Sandeman over $3.5 million in complex ETP losses

FINRA barred former Wedbush Securities broker William H. Sandeman under a settlement finalized Monday, after finding that his recommendations to buy and hold complex exchange-traded products cost 81 retail investors more than $3.5 million. Sandeman, a Seattle broker who spent half of his 48-year career at the Pasadena, California, firm, made those recommendations between December 2020 and January 2025 without understanding the products' risks or weighing his clients' investment profiles, the regulator said.

Volatility-linked ETPs take their exposure to the Chicago Board Options Exchange Volatility Index through VIX futures, which must be sold and replaced with costlier contracts as they roll, so they tend to lose value the longer they sit in an account; non-traditional ETPs chase leveraged or inverse returns for a single trading session, and daily compounding can pull multi-year results well away from the benchmark. Though the prospectuses for the products Sandeman recommended disclosed both risks, that language did not carry the recommendation; the settlement letter said he violated Regulation Best Interest and FINRA's Rule 2010, the conduct catch-all.

Most of the 81 clients carried moderate or conservative risk tolerances, and 59 were seniors, according to the settlement, while some held the products for nearly four years and most held them at least a year.

Sandeman agreed to the bar without admitting or denying the findings, and Wedbush terminated his registration in January 2025 over "lack of confidence related to performance"; FINRA's investigation followed an examination of the firm. The settlement imposed no sanctions on Wedbush, which it describes as having around 400 advisors, and Sandeman's BrokerCheck record lists one customer dispute in the past ten years tied to ETF holdings; that claim settled for $30,000 of the $350,000 sought, with no contribution from him.

The arithmetic is uncomfortably retail-sized for a practice that touches these products, with losses working out to a little over $43,000 an investor; a bar after 48 years in the industry did not require one large account, and the findings trace to a firm examination rather than the single dispute on his record.

For advisors who recommend anything leveraged, inverse, or volatility-linked, a position that survives a statement cycle needs a dated, written reason for staying and a sign-off from someone other than the broker who bought it. Stated risk tolerance and age, along with the length of the hold, are the first facts a suitability finding leans on—the settlement's own fact pattern of moderate and conservative clients, 59 of them seniors, is what that looks like on paper.

The bar attaches to the broker alone, and the part an advisor controls is narrower: which products get recommended into a retail book, and how long the clients who buy them keep holding.