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March 5, 2008

Oppenheimer & Co. Agrees to Settle FINRA Market Timing Charges for $4.5 Million

Oppenheimer & Co. has settled Financial Industry Regulatory Association charges regarding the market timing of mutual funds. The company has agreed to pay $4.25 million as restitution to five dozen mutual fund companies, as well as a $250,000 fine.

FINRA says that Oppenheimer failed to stop five traders’ engagement in improper, short-term mutual fund trading. The self-regulatory organization noted Oppenheimer’s failure to set up, manage, and enforce systems of supervision to detect and prevent market timing activities.

As a result, FINRA says that Oppenheimer disregarded hundreds of warnings and requests from mutual funds and life insurance companies that they stop making the improper trades. Some 65 mutual funds even warned Oppenheimer that short-term trades were not in the best interests of long-term shareholders.

FINRA says that five Oppenheimer traders maintained approximately 580 accounts for 15 hedge fund clients. FINRA says that the brokers tried to get around market timing trading blocks. They also tried to hide the real identities of the account holders and distributed the market timing money over multiple accounts.

51 registered representative numbers were used to make it look like reps that hadn’t been blocked were engaging in the trades. The traders used omnibus trading platforms run by Fidelity and Schwab to hide their identities. FINRA says that they also sold variable annuity contracts to hedge fund clients so that they could use the yearly sub-accounts for market timing activities.

The improper activities caused Oppenheimer to generate approximately $9 million in gross revenue. Oppenheimer is not admitting to or denying the allegations by agreeing to settle.

If you are an investor who has lost money because you were the victim of broker misconduct, contact Shepherd Smith and Edwards right way and ask for your free consultation with one of our stockbroker fraud lawyers.

Related Web Resources:

Oppenheimer Pays $4.5 Million in Market-Timing Probe, Bloomberg.com, February 21, 2008

Oppenheimer & Co, Inc.

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November 13, 2007

Oppenheimer to Pay $1 Million to Settle FINRA Bogus Data Charges

Oppenheimer & Co. says it will pay a $1 million fine to settle charges by the Financial Industry Regulatory Authority that it turned in false information regarding mutual fund breakpoints. The company also has agreed to submit to having an independent consultant conduct an audit regarding how Oppenheimer handles regulatory inquiries. By agreeing to the settlement terms, Oppenheimer is not agreeing to or denying FINRA’s allegations.

Background
FINRA says it initially asked Oppenheimer for the information in March 2003 when the self-regulatory organization (then the NASD) looked at over 2000 broker-dealers who had sold front-end loan funds over a two-year period.

FINRA’s request was based on the discovery that nearly one in three mutual fund transactions in front-end loans seemed to qualify for a discount but did not get one.

FINRA says that in June and November 2003, Oppenheimer turned in data that was not complete or accurate after FINRA’s request that brokers assess their breakpoint practices. The term breakpoint refers to discounts or other benefits clients can obtain if they buy a certain number of funds at the same time.

The first time FINRA received the data, FINRA says it knew the information was “flawed” and notified Oppenheimer immediately.

The second assessment also contained “obvious deficiencies,” says FINRA. Linked accounts were not identified, ineligible transactions were included, overcharged trades were not properly identified, and correct discount information was left out.

When a broker-dealer engages in inappropriate actions, investors, unfortunately, can incur financial losses. The best chance an investor has of recouping their lost investment(s) is to retain the services of an experienced stockbroker fraud lawyer who can help you.

Contact Shepherd Smith and Edwards today and ask for your free consultation with one of our experienced stockbroker fraud attorneys.

Related Web Resources:

FINRA Fines Oppenheimer $1 Million, Associated Press/Forbes, October 30, 2007

Oppenheimer & Co Inc.

Mutual Fund Breakpoints: A Break Worth Taking, FINRA, January 14, 2003

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October 12, 2007

Oppenheimer, Morgan Stanley, Nomura Securities, and A.G. Edwards Traders Face SEC Charges of Stealing Stock Loan Kickbacks Worth $12 Million Plus

38 stock loan traders from A.G. Edwards, Morgan Stanley, Oppenheimer, and Nomura Securities are accused of stealing over $12 Million in stock loan kickbacks from their Wall Street firms. The Securities and Exchange Commission has charged the employees with the more than $12 million theft.

The SEC says that from 1998-2006, the traders worked with fake stock loan finders to skim profits from their employers through finder fees as well as cash kickbacks from finders. The stock loan traders conducted actual, legal stock loans but logged that the transactions involved finders, so there would be finder’s fees.

The finders were usually friends or relatives of the traders who were in charge of illegitimate “shell companies” that were not even a part of the stock loan business. The “finder” would then pay traders with kickbacks. The more sophisticated scams involved traders using their kickbacks to pay the other traders who had pushed through the loan transactions.

21 stock shell companies/stock loan finders (including a perfume salesman, a mailman, a dental receptionist, and a pharmacist) and 17 former and current stock loan traders now face SEC charges. The SEC says a few of these illegal operations took place in bars and restaurants throughout New York City where participants passed around payments worth thousands of dollars. The money was wrapped in newspapers or in envelopes.

In one case, two stock loan traders from Morgan Stanley are accused of stealing $1 million in undisclosed kickbacks from a shell company run by one of the trader’s relatives.

Federal prosecutors have filed charges of criminal fraud and conspiracy against 5 of the stock loan traders. 10 people have pled guilty in the case.

If you are an investor that has lost money because a member of the securities industry engaged in illegal activities, you should contact Shepherd Smith and Edwards today. We have helped thousands of people recover their financial losses. One of our experienced securities litigation attorneys would be happy to speak with you.

Related Web Resources:

US SEC charges 38 traders in stock loan scheme, Reuters, September 20, 2007

SEC Charges 38 Defendants in Multi-Million Dollar Stock Loan Scams, SEC.gov, September 20, 2007

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Posted In: AIG SunAmerica , Morgan Stanley , Nomura Securities , Oppenheimer , SEC Enforcement

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July 10, 2007

Oppenheimer Fined $1 Million for Abuse of Widow – Later Told She “Only Had Herself to Blame”

Massachusetts securities regulators fined Oppenheimer & Company, Inc. a million dollars for failing to supervise its representatives and ordered the company to also pay $135,000 to the victim, the difference between the losses she sustained and the amount Oppenheimer earlier paid her.

Oppenheimer was charged with failing to supervise a broker as he allegedly engaged in acts including theft, fraud, churning and unauthorized trading in the account of an elderly couple. The firm consented to the order without admitting or denying the claims. The broker is currently under indictment for securities fraud.

After her husband died, personnel at the elderly woman's bank raised concerns over the activity which had occurred in the couple's brokerage account. The widow approached Oppenheimer and claims were ultimately filed in arbitration. Oppenheimer then responded by saying she “only has herself to blame for any losses or other injury she may have suffered.” The arbitration claims were later resolved with Oppenheimer paying less than was lost.

The Massachusetts Consent Order states that Oppenheimer failed to reasonably supervise the broker whose trading was excessive based on the couple’s age, objectives, risk tolerance, financial condition, financial sophistication and personal health. It adds that Oppenheimer’s branch manager repeatedly reviewed and approved the activity and that inadequate action was undertaken by the compliance department.

Further action will apparently also be taken against Oppenheimer for stating that it had provided the regulators with all relevant e-mails during the investigation, which the regulators claim is false.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

Massachusetts Securities Division's Consent Order against Oppenheimer & Company, Inc.

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