Oppenheimer Fined by FINRA for Third Time in Five Years
Published On: June 11, 2024

Longtime broker-dealer, Oppenheimer & Co, Inc. found themselves in hot water with the Financial Industry Regulatory Authority, once again. According to a FINRA filing from May 7th, 2024, the New York-based based company committed numerous violations in relation to the supervision of direct business transactions made by registered representatives on behalf of their customers. Sadly, Oppenheimer is not new to censures and fines by FINRA in recent years. The company was slapped with similar sanctions, first in 2019 and then in 2021. All three filings cite supervisory negligence as the catalyst for the sanctions, shining a light on a troubling and seemingly ongoing pattern within the managerial levels of the company.

Oppenheimer Faces Fines Following Major Trade Reporting Failures and Supervisory Lapses

The most recent disciplinary filing stems from the results of a retrospective review which Oppenheimer conducted in 2021. It was discovered that approximately 490,000 direct business transactions did not appear on the firm’s daily trade blotter between 2012 – 2017. As a result, these transactions, made on behalf of over 14,000 customers by registered representatives, were not run through Oppenheimer’s exception reports. Such reports are designed to identify potential sales practice violations, such as transactions that may be deemed unsuitable. The firm also found that crucial information was missing from their customers’ investment profiles, including age, liquidity needs, and investment time horizons. The company’s failure to ensure their registered representatives were properly collecting and reporting this data violated NASD Rule 3010, FINRA rules 3110, 2010, 4511 and Section 17(a), 17a-3 of the Securities Exchange act of 1934. Ultimately, the firm was censured and ordered to pay a fine of $500,000.

The May 7th filing shares a lot of similarities to another from 2019 which, according to the filing, was the first instance of the firm facing disciplinary actions of this caliber. FINRA alleged that Oppenheimer failed to reasonably supervise the recommendations made by their representatives pertaining to early rollovers of Unit Investment Trusts between 2011 – 2015. UIT’s are long-term in nature, and not suited for short-term trading. However, Oppenheimer representatives recommended the customers sell their UIT’s before the maturity date and use the sale proceeds to purchase a new UIT. In doing so, the customer would incur higher sales charges than if they had waited until after the maturity date. During this time, over $6.4 billion in UIT transactions were executed by the firm, resulting in $68.6 million in sales charges.

Oppenheimer not only failed to properly oversee these transactions but neglected to maintain a system to identify when such unsuitable transactions were made. As a result, the firm was found to have violated NASD Rule 3010, FINRA Rules 3110 and 2010, which require member firms to establish, maintain and enforce systems and written procedures to supervise the activities of their associated persons. The firm was ordered to pay a whopping $800,000 in fines and another $3,874,206.90 plus interest in restitution to the impacted customers. As previously mentioned, the filing notes that the broker-dealer did not have any relevant disciplinary history prior to 2019, and FINRA also credited the firm for their “extraordinary cooperation” with this specific matter.

Considering Oppenheimer’s long-standing reputation and FINRA’s own acknowledgment of their cooperation in 2019, one could have argued that it was simply an oversight. Surely a nearly 80-year-old broker-dealer with years of experience was not carelessly shirking their fiduciary responsibilities to their customers by neglecting to oversee the work done by their representatives.  Unfortunately, the firm was back in the hot seat less than two years later, and a trend began to emerge.

Oppenheimer Was Fined Again for Misrepresentation of Cost Basis and a Pattern of Supervisory Negligence

In April 2021, Oppenheimer was slapped with another censure, and a fine of $525,000 for negligently misrepresenting cost basis information on the account statements and 1099 Forms for over 1,000 customers between 2014 – 2019. The firm was found to be in violation of FINRA Rules 4511 and 2010, which pertain to the high standards required of FINRA member firms in relation to business conduct and bookkeeping standards. As reported in the filing, the negligence was directly attributed to Oppenheimer supervisors failing to understand changes made to applicable regulations set by the IRS. Even worse, Oppenheimer didn’t discover the error independently. It wasn’t until after a routine examination of the firm by FINRA that this significant issue was brought to their attention.

The three disciplinary filings share a great deal of overlap. The relevant periods all occurred in the 2010s, NASD Rule 3010 and FINRA Rules 2010, 3010, and 4511 were violated, and the cause for the violations was supervisory negligence. Most importantly, all three filings highlight a well-known, yet still depressing fact: Oppenheimer’s customers were simply not important enough to the firm to ensure they were practicing due diligence. It is yet another instance of a firm prioritizing profits over people. While Oppenheimer was officially disciplined by FINRA, the very individuals who entrusted the firm with their financial futures were the ones hit the hardest.

If you invested money with an Oppenheimer & Co, Inc. representative and lost money as a result, you may have a FINRA claim to pursue. Call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation, initial consultation with an experienced securities arbitration attorney. We are a contingency fee law firm which means we do not get paid until you do.

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