January 28, 2015

Oppenheimer to Pay $20M Settlement to the SEC and FinCEN Over Penny Stock Violations

Oppenheimer & Co. (OPY) has consented to pay $20 million to resolve settlements with the U.S. Securities and Exchange Commission and the Financial Crimes Enforcement Network. The firm is accused of not properly identifying and reporting suspect trades in penny stocks. The low priced, highly speculative securities are easy to manipulate and involve in pump-and-dump scams.

At least 16 Oppenheimer customers in several U.S. states were reportedly identified as having engaged in “suspicious activity.” Admitting guilt, the broker-dealer acknowledged that it did not set up and implement a proper anti-money laundering program nor did it perform sufficient due diligence on a foreign correspondent account. Oppenheimer also said that it failed to comply with the USA PATRIOT Act’s Section 311, which allows FinCEN’s director to decide whether a foreign financial firm is a money laundering risk.

The government agency said that because Oppenheimer did not notify its foreign correspondent financial institutions of the special measures under Section 311, the firm ended up conducting business without setting up the necessary procedures, policies, and internal controls that allow it to reasonably report and detect suspect fraud activity from ’08 to ’14.

FinCEN noted that this is the second time it has penalized the Oppenheimer for similar violations. It fined Oppenheimer $2.8 million in 2015. In 2013, it was the Financial Industry Regulatory Authority that fined the broker-dealer $1.4 million for anti-money laundering failures and securities laws violations.

Meantime, in the SEC’s parallel action, the regulator noted two times between ’08 and ’10 when the firm took part in unregistered penny stock sales. One incident involved a financial adviser and his branch manger purposely engaging in the unregistered sales of 2.5 billion penny stock shares for one customer even though the shares were not registration exempt. The trades made $12 million and the firm got $588,400 in commissions. Oppenheimer is accused of not reacting to red flags or looking into whether sales were exempt from registration.

The other incident is over Oppenheimer’s possible involvement in purportedly illegal activities involving Gibraltar Global Securities, which is a broke-dealer in the Bahamas that is not registered to do business in the United States. The firm purportedly executed billions of shares of penny stocks in Gibraltar’s account and either knew or was negligent if it didn’t know that that firm was making transactions and providing brokerage services for customers, many of whom were based in the U.S.

The Commission said that Oppenheimer did not report possible misconduct by Gibraltar and its clients and, also, did not properly deal with over $3 million in backup withholding taxes in that brokerage’s account. The filing of Suspicious Activity Reports is a Bank Secrecy Act requirement.

As part of the SEC settlement, Oppenheimer is admitting wrongdoing and will pay $10 million. The other $10 million resolves the FinCEN claims.

Read the SEC Order (PDF)

FBI raids Florida firm with 'Wolf of Wall Street' link: witnesses, Reuters, January 14, 2014

More Blog Posts:

SEC Sanctions UBS, Charles Swab, Oppenheimer, & 10 Other Firms For Improper Sales of Puerto Rico Junk Bonds, Stockbroker Fraud Blog, November 3, 2014

Ex-Oppenheimer Fund Manager to Pay $100K To Settle Private Equity Fund Fraud Charges, Institutional Investor Securities Blog, January 25, 2014

Oppenheimer Told by FINRA to Pay $675,000 Fine, $246,000 Restitution over Municipal Securities Transaction Pricing, Supervisory Violations, Stockbroker Fraud Blog, December 12, 2013

December 10, 2014

SEC Headlines: Regulator Probes Oppenheimer Executive, Prepares Insider Trading Case Against Policy Research Firm, & Wants to Suspend Standard & Poor’s From Rating CMBSs

SEC Investigating Ex-Oppenheimer Executive for Securities Law Violations
According to Bloomberg.com, Robert Okin, Oppenheimer & Co.’s (OPY) former retail brokerage head, is under investigation by the Securities and Exchange Commission. In October, the agency’s enforcement division notified Okin that, based on a preliminary determination, it intended to file charges against him for securities law violations, including failure to supervise.

Okin is no longer with Oppenheimer. He resigned earlier this month to pursue “other interests.” Okin denies violating the Securities Exchange Act.

Marwood Group LLC May Be Subject to Insider Trading Charges
Earlier this month, the SEC notified Marwood Group LLC that it is looking to bring an enforcement action against the Washington policy-research firm for insider trading.

The Commission is looking at whether Centers for Medicare and Medicaid Services officials gave the firm inside information about funding for Provenge, a prostate cancer drug. The product’s manufacturer, Dendreon Corp. (DNDNQ), saw its shares drop before the CMS decided to cut coverage on the medication in 2010, as opposed to after.

According to the regulator, a year before the CMS cut coverage, a CMS employee allegedly gave a Marwood employee insider information about the reduction. A week after the reduction was officially announced, the political intelligence put out a research report that included details about the change in coverage

A Marwood spokesperson maintains that the firm did nothing wrong, noting that no one benefited financially from the information. However, SEC officials have said that such a conversation is the equivalent of insider trading.

Under the 2012 Stop Trading on Congressional Knowledge Act, public officials are obligated to keep government-related non-public data hat could shift share prices confidential.

SEC Looks to Suspend S & P from Rating Commercial Mortgage-Backed Securities
The Commission wants to suspend Standard & Poor’s from rating CMBSs. The regulator has been probing whether the credit rating agency modified criteria in 2011 to win business.

In July, the regulator sent S & P a Wells notice notifying it that the agency was pursuing an action linked to six commercial mortgage-backed securities ratings from a few years ago. The purported violations involve the public disclosure and rankings that the credit rating agency made about the securities.

It was in 2011 that the S& P withdrew the grades it issued for a CMBS offering that came from Citigroup (C) and Goldman Sachs Group (GS). This caused both institutions to drop the deal after its placement with investors.

Standard & Poor had withdrawn the rankings to assess whether there were conflicts in the way it used its methodology. It also stopped rating new CMBSs. In August of that year, however, S & P said that it would resume grading deals, noting that the conflict was not a big deal. It modified its criteria the following year and went back into the market.

SEC investigating top Oppenheimer executive
, Investment News, December 10, 2014

Marwood Grp Gets Wells Notice in Insider Trading Crackdown on 'Political Intelligence'
, Fox Business, December 9, 2014

SEC Seeking S&P’s Suspension From Rating Commercial Mortgage Bonds, Bloomberg, December 8, 2014

2012 Stop Trading on Congressional Knowledge Act (PDF)

More Blog Posts:
Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 11, 2014

SEC Claims Fraud Involving a REIT and Bogus Senior Resident Occupants, Institutional Investor Securities Blog, December

November 3, 2014

SEC Sanctions UBS, Charles Swab, Oppenheimer, & 10 Other Firms For Improper Sales of Puerto Rico Junk Bonds

The Securities and Exchange Commission has sanctioned thirteen financial firms, including UBS Financial Services (UBS), Charles Schwab and Co. (SCHW), J.P. Morgan Securities (JPM), and Stifel Nicolaus & Co. (SF), for the improper sales of Puerto Rican junk bonds. A $100,00 minimum denomination had been established in junk bonds of $3.5 billion made by Puerto Rico several months ago. An SEC probe, however, revealed that there had been 66 instances when firms sold the bonds in transactions of under $100,000.

Municipal bond offerings are supposed to have a set minimum denomination that determines the smallest amount that a firm can sell to an investor during a single transaction. Typically, municipal issuers will establish high minimum denominations for junk bonds with a greater default risk. This is done to limit the bonds from ending up in the accounts of investors who may not be able to handle the risks.

The firms and their fines: UBS Financial Services for $56,400, Charles Schwab & Co. for $61,800, Oppenheimer & Co. (OPY) for $61,200, Wedbush Securities Inc. for $67,200, Hapoalim Securities USA for $54,000, TD Ameritrade (AMTD) for $100,800, Interactive Brokers LLC for $56,000, Stifel Nicolaus & Co. (SF) for $60,000, Investment Professionals Inc. for $67,800, Riedl First Securities Co. of Kansas for $130,000, J.P. Morgan Securities for $54,000, National Securities Corporation for $60,000, and Lebenthal & Co. for $54,000.

The firms are accused of violating Rule G-15 of the Municipal Securities Rulemaking Board. The rule sets the minimum denomination requirement. The SEC says that by conducting sales under the minimum denomination, the firms violated the Securities Exchange Act of 1934’s Section 15B(c)(1), which does not allow for any MSRB rule to be violated.

All 13 firms agreed to settle the SEC’s findings without admitting to or denying them. The firms also agreed to be censured. They will review their respective procedures and policies, as well as make the needed changes to ensure appropriate compliance moving forward.

Our Puerto Rico muni bond fraud lawyers represent investors in the Commonwealth and on the mainland. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

SEC Sanctions 13 Firms for Improper Sales of Puerto Rico Junk Bonds, SEC, November 13, 2014

Rule G-15, Municipal Securities Rulemaking Board

Securities Exchange Act of 1934
, Legal Information Institute

More Blog Posts:
Investors Have Filed Close to $1B of Puerto Rico Bond Fraud Claims against UBS, Stockbroker Fraud Blog, October 29, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013

UBS Brokers Are Still Selling Puerto Rico Muni Bonds, Stockbroker Fraud Blog, October 20, 2014

August 15, 2014

UBS Wealth, OppenheimerFunds Take Financial Hit From Puerto Rico Muni Bonds

Even though UBS Wealth Management Americas (UBS) has been generating record revenue, the financial firm saw its profits drop upon reporting that had it put aside $44 million for litigation costs primarily related to Puerto Rico bond fraud cases. UBS’s second quarter earnings of $238 million are 3% lower than last year.

Already, UBS clients have filed hundreds of arbitration cases and a number of securities class action lawsuits contending that the brokerage firm put investors’ money in highly leveraged and unsuitable Puerto Rico municipal bond funds that dropped in value last year. These funds begun to lose value again recently.

OppenheimerFunds Inc. (OPY), which is the biggest mutual fund to hold Puerto Rico debt, has also taken a financial hit. Bloomberg reports that in the past year, the firm has seen a loss of close to a third of its funds’ assets. For example, the Oppenheimer Rochester Maryland Municipal Fund (ORMDX) directed approximately 35% of its holdings to the islands as of the end of June. As of August 4, its assets had dropped to $64.9 million. At this time last year, the fund had $96.1 million in assets.

On Thursday, the Puerto Rico Electric Power Authority (Prepa) and creditors arrived at a deal that will give the public agency time to restructure. Prepa will appoint a chief restructuring officer and must come up with a five-year business plan. The agreement will allow the Puerto Rican power authority to utilize $280 million that was in a construction fund to cover capital improvements and current costs. Prepa had until yesterday to extend its credit line with banks or restructure around $9 billion in debt.

Last month, the power authority arrived at deals with Citigroup (C), Bank of Novia Scotia (BNS) and other banks, which has allowed it to delay about $671 million in payments that it owed them. Standard & Poor’s has lowered the utility bonds’ ratings into junk territory.

Puerto Rico lawmakers recently approved legislation that would let a number of public agencies overhaul their finances. Public utilities can work out deals with bondholders to reduce their debt load. Oppenheimer Funds and Franklin Templeton (BEN) have since gone to court to challenge the constitutionality of the law. Their investment funds hold approximately $1.6 billion in Prepa bonds.

The firms believe that the power authority can fulfill its obligations without having to restructure. Puerto Rico wants the judge to dismiss the lawsuit. BlueMountain Capital Management LLC., which holds over $400 million in Prepa-issued bonds, has also filed a lawsuit.

At Shepherd Smith Edwards and Kantas, LTD LLP, our Puerto Rico Bond fraud lawyers have already filed dozens of securities fraud claims against UBS and other brokerage firms related to Puerto Rico bonds or mutual funds holding Puerto Rico Bonds. We represent investors in the U.S. and in Puerto Rico. Please call us for a fee, no obligation, consultation if you or someone you know has lost money investing in Puerto Rico Bonds or funds tied to the Puerto Rico bond market.

Puerto Rico debt depresses UBS Wealth earnings, InvestmentNews, July 29, 2014

OppenheimerFunds Sees Some Funds Shrink 33% on Puerto Rico Bonds, Bloomberg, August 5, 2014

Puerto Rico PREPA Utility Announces Creditor Agreement, Extension, Barron's, August 14, 2014

More Blog Posts:
Investors Pursue UBS's Puerto Rico Brokerage Over Closed-End Bond Funds, Stockbroker Fraud Blog, July 23, 2014

OppenheimerFunds, Franklin Templeton Sue Over Puerto Rican Debt Law, Stockbroker Fraud Blog, July 2, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013

March 19, 2014

Former Morgan Stanley Broker and Two Others Allegedly Ran $5.6M Insider Trading Scam, Swallowed The Information

In an alleged insider trading scam that could have been ripped out of the plot of a movie, prosecutors are accusing three men of engaging in methods of spycraft, including eating the evidence, as they ran an insider trading racket that netted about $5.6 million. The information they used was purportedly obtained from Simpson Thacher & Bartlett, LLP, which is the premier mergers-and-acquisitions law practice in New York. The firm is known for its work involving mergers and acquisitions and private equity.

Prosecutors say that Steven Metro, a managing clerk at the law firm, used his employer’s computer system to gather information about deals and other corporate developments involving clients. He then shared the information, which, according to The Wall Street Journal, included data about Tyco International Ltd.’s intentions to purchase Brink’s Home Security Holdings Inc., as well as the Office Dept. Inc. Office Max Inc. merger, with an unnamed mortgage broker during coffee shop and bar meetings. That person then allegedly gave the info to broker Vladimir Eydelman, who until recently, was with Morgan Stanley (MS) (and before that (Oppenheimer & Co. (OPY)) Edylman, 42, then traded on the data.

Metro and Eydelman were arrested this week and then released on $1 million bond. They face numerous criminal charges, including securities fraud. Meantime, the unnamed mortgage broker is working with prosecutors and is expected to consent to a plea deal.
Both Morgan Stanley & Oppenheimer are also cooperating in the probe.

Beginning in 2009, Metro and the unnamed broker would meet with friends for drinks. The unnamed broker and Eydelman would then meet by the large clock at Grand Central. A piece of paper with the stock trading symbol of the company would allegedly be flashed between them and then eaten once the data was memorized. Eydelman also allegedly set up a fake paper trail and “contrived emails” with information to make it seem as if the illegal trades were legitimate.

Shepherd Smith Edwards and Kantas, LTD LLP represents securities fraud victims in getting back their losses. Contact our investment fraud lawyers today.

U.S. Alleges Inside Traders Used Spycraft, Ate Evidence, The Wall Street Journal, March 19, 2014

Morgan Stanley Broker Charged in Post-It Insider Scheme, Bloomberg, March 19, 2014

More Blog Posts:
JP Morgan VP Barred from Securities Industry By FINRA for Insider Trading Scam, Stockbroker Fraud Blog, January 25, 2014

JPMorgan To Pay $2.6B in Penalties in Bernard Madoff Ponzi Scam Settlements, Stockbroker Fraud Blog, January 7, 2014

SAC Capital Advisors LP Expected to Plead Guilty to Insider Trading Criminal Charges, Institutional Investor Securities Blog, October 31, 2013

February 14, 2014

OppenheimerFunds Increases Its Exposure to Puerto Rico Debt Despite Downgrade by Moody’s, S & P, and Fitch to Junk Status

Even though Puerto Rico’s debt has been downgraded to “junk” status by the three major ratings agencies (Standard & Poor’s, Moody’s, and Fitch Ratings), OppenheimerFunds (OPY) has increased its holding of Puerto Rican debt in two of its municipal bond funds that carry lower risk. The credit raters downgraded the US Commonwealth over worries about its failing economy and decreased ability to finance its deficits in capital markets.

According to Reuters, Lipper Inc. says that at the end of last year, the Oppenheimer Rochester Short-Term Municipal Fund's (ORSCX) exposure to Puerto Rico’s debt had risen 13% from a year ago, while its Intermediate-Term Municipal Fund more than doubled its exposure to 17%. (Details of the holdings in both funds since then are still unavailable.) Both have a 5% limit on how much junk-rated debt they can contain. However, because the US territory’s debt was downgraded after the buys were made, Oppenheimer, which is part of MassMutual Financial Group, may not obligated to unload the assets.

The company has continued to support Puerto Rico municipal bonds, even as a lot of other mutual fund firms have lowered their exposure to Puerto Rico debt. This week, Oppenheimer downplayed the investment risk involved, noting that most bonds involved are insured (Reuters reports that 27% of the holdings in the intermediate-fund and another 4% in the short-term fund, do not have insurance).

In addition to the Rochester short and intermediate bond funds, Oppenheimer has several state specific bond funds that also have significant exposure to Puerto Rican debt. Bloomberg says that the Oppenheimer funds that are focused on Pennsylvania, Massachusetts, Virginia, North Carolina, and Maryland have the largest weightings toward the US commonwealth out of all its state-specific funds —more than 25% each. Its Limited-Term New York Municipal Fund has 25% of its bonds coming from Puerto Rico as well.

Some of Oppenheimer’s funds have started to see outflows of investors because of the exposure to Puerto Rican debt. Last month, for example, investors withdrew roughly $317 million from Rochester muni bond funds. Similarly, a lot of other industry players are taking the same stance, with BlackRock Inc. (BLK), Vanguard, and others eliminating or lowering their exposure to Puerto Rico debt. On Wednesday, Fitch said that in a look at six large asset managers and their 92 municipal closed-end funds, on average Puerto Rico debt had been reduced by over 65% during the last half of last year. Two managers left their holdings completely.

Our Puerto Rico bond fraud lawyers represent investors with muni bond fraud claims against many major Wall Street firms as well as a number of Puerto Rico based firms including: UBS (UBS), Banco Santander (SAN), and Banco Popular. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Oppenheimer Rochester on Puerto Rico Downgrades: An Update, OppenheimerFunds, February 12, 2014

OppenheimerFunds increased Puerto Rico risk in two safer funds, Reuters, February 12, 2014

More Blog Posts:
Standard and Poor’s Reduces Puerto Rico Obligation Debt to Junk Status, Stockbroker Fraud Blog, February 6, 2014

How Can you Recover Your Loss on UBS Puerto Rico Municipal Bonds?, Stockbroker Fraud Blog, February 7, 2014

Ex-Oppenheimer Fund Manager to Pay $100K To Settle Private Equity Fund Fraud Charges, Institutional Investor Securities Blog, January 25, 2014

December 12, 2013

Oppenheimer Told by FINRA to Pay $675,000 Fine, $246,000 Restitution over Municipal Securities Transaction Pricing, Supervisory Violations

The Financial Industry Regulatory Authority says Oppenheimer & Co., Inc. (OPY) must pay a $675,000 fine purportedly charging customers unfair prices in municipal securities transactions and not having a proper supervisory system in place to detect such activities. The firm must pay $246,000 in restitution, in addition to interest, to customers that were affected. The SRO is ordering David Sirianni, the head municipal securities trader at Oppenheimer, to pay a $100,000 fine and serve a 60-day suspension.

According to FINRA, from 7/1/08 through 6/30/09, Oppenheimer, via Sirianni, charged 89 customer transactions at 5.01% to 15.57% over its contemporaneous cost. (The markup was over 9.4% in over 50 of these transactions). The SRO said that it was Sirianni’s job to decide what prices the customers paid for these transactions. He was the one who bought the municipal securities for Oppenheimer, kept them in inventory, and then resold them to Oppenheimer clients.

FINRA contends that Oppenheimer should have but did not notice that customers were being charged prices that were unfair. The regulator believes it is because the firm has an inadequate supervisory system and that personnel only depended on a surveillance report showing intra-day transactions when assessing whether municipal securities transactions were fairly priced. It said that from around 2005 through the middle of 2009, sales made to some Oppenheimer customers were not included in the report or reviewed for fair pricing.

While Oppenheimer is settling FINRA’s charges, it is not denying or admitting to the allegations.

Contact our municipal fraud lawyers today.

FINRA Fines Oppenheimer $675,000 and Orders Restitution of More Than $246,000 for Charging Unfair Prices in Municipal Securities Transactions and for Supervisory Violations, FINRA, December 9, 2013

Finra Fines Oppenheimer, Trader For Alleged Unfair Pricing, The Wall Street Journal, December 9, 2013

More Blog Posts:
Oppenheimer & Co. to Pay $1.4M to FINRA For Allegedly Unregistered Penny Stock Sale & Anti-Money Laundering Violations, Stockbroker Fraud Blog, August 5, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud
, Stockbroker Fraud Blog, April 19, 2013

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

August 5, 2013

Oppenheimer & Co. to Pay $1.4M to FINRA For Allegedly Unregistered Penny Stock Sale & Anti-Money Laundering Violations

The Financial Industry Regulatory Authority says that Oppenheimer & Co. (OPY) will pay a $1,425,000 fine for the purported sale of penny stock shares that were unregistered and for not having an anti-money laundering (AML) compliance program that was adequate enough to identify and report suspect transactions. The financial firm also must get an independent consultant to perform a comprehensive review of its AML procedures, systems, and policies and its penny stock.

According to the SRO, from 8/18/08 to 9/20/10, Oppenheimer sold over a billion shares of twenty penny stock that were low-priced and very speculative but were not registered or lacked an exemption that was applicable. Soon after opening accounts, customers deposited huge blocks of penny stock and then liquidated them, moving proceeds out of the accounts.

FINRA contends that each sale came with “red flags” that should have spurred the firm to additional review to find out whether or not these were registered sales but that adequate supervisory assessment did not happen.The regulator also believes that Oppenheimer’s procedures and systems over penny stock transactions were not adequate and that because its AML program wasn’t focused on securities transactions it was unable to detect patterns of suspect activity linked to penny stock trades.

By agreeing to settle, Oppenheimer is not denying or admitting to the charges. It has, however, consented to the entry of findings. This is the second time Oppenheimer has purportedly violated AML obligations.

Penny Stock
According to the Securities and Exchange Commission, these are stocks that trade for under $5. Most of them are risky investments with low trading volumes. Companies trade penny tocks primarily on Pink Sheets and the OTCBB (OTC Bulletin Board). They are at risk of the types of market manipulation that are harder to conduct when the stocks are on NYSE or Nasdaq. Penny stocks are “micro-cap stocks.”

It is important that investors exercise caution when investing in penny stocks. The opportunity for big profit is countered by an even bigger possibility of large losses.

According to Investopedia, four factors that make penny stock more high risk than blue chip stocks:

Not enough information available to the public: A lot of data about micro-cap stocks don’t come from credible sources and companies found on pink sheets don’t have to file with the SEC.

Lack of minimum standards: Stocks found on pink sheets and the OTCBB don’t have to satisfy minimum standard requirements to stay on the exchange. Companies that are unable to stay on a major exchange can go to a smaller one.

Insufficient history: A lot of companies that are considered to have micro-cap stocks are either new or close to bankruptcy. Track records for projecting success will be nonexistent or poor.

Lack of liquidity: It could be hard to sell the stock and/or an investor might have to lower price to get a buyer. Low liquidity makes it easier to manipulate stock prices. The pump and dump scam of penny stock is a favorite of fraudsters.

Contact one of our penny stock fraud lawyers to find out whether you have a case.

FINRA Fines Oppenheimer & Co., Inc. $1.4 Million for Sale of Unregistered Penny Stocks and Anti-Money Laundering Violations, FINRA, August 5, 2013

The Lowdown On Penny Stocks, Investopedia

More Blog Posts:
Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

Oppenheimer Funds Investors Can Proceed with Their Securities Fraud Lawsuit, Stockbroker Fraud Blog, November 19, 2011

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

April 19, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud

A FINRA arbitration panel is ordering ex-broker Karl Hahn, who previously worked with Bank of America Corp's (BAC) Merrill Lynch (MER), Oppenheimer & Co. (OPY), and Deutsche Bank AG’s (DB) Deutsche Bank Securities, to pay investor Chase Bailey $11 million because he sustained about $6 million in losses allegedly caused by securities fraud. Bailey contends that Hahn made excessive trades and misrepresented securities related to transactions involving a number of investments, including a variable annuity, approximately $2.3 million in fraudulent real estate financing involving East Coast properties, and covered calls.

In the filmmaker/Internet entrepreneur’s securities arbitration claim, Bailey named the three financial firms where Hahn previously worked. It is during this period that Bailey was allegedly defrauded. (He had moved his funds from one brokerage firm to the other each time Hahn was hired by that employer.) Bailey settled his case with Merrill for $700,000, while claims against Deutsche Bank and Oppenheimer were tossed out.

Per the FINRA arbitration ruling, Bailey is awarded $6.4 million in punitive damages and $4.1 million in compensatory damage. Ordering brokers to pay punitive damages is uncommon.

In February, Deutsche Bank & Hahn were ordered to pay $934,000 to Susan and Michael Myers. The couple, who had sued on their behalf and for a number of trusts, had claimed civil fraud, while contending that financial firm had negligently supervised Hahn, who worked in its private wealth management division between 2008 and 2009.

The Myerses had bought high-risk life insurance in which policyholders use loans usually tied to variable interest rates to finance premiums. Hahn, who advised the couple via Deutsche Bank, allegedly failed to tell them that his dad would get a “significant” commission from that life insurance policy. They said that this might have been the reason he recommended that they invest in the policy. (Brokers are not supposed to make investment recommendations that will benefit them or those that they know.) The Myerses claimed substantial losses.

Hahn has been involved in other securities cases. He was charged with wire fraud involving an alleged $1.1 million real estate scam in 2010. He also was involved in a $2.55 million federal court judgment that Deutsche Bank obtained in 2012. That lawsuit involved the unpaid balance of a $2.8 million bonus he got when he joined the financial firm.

Contact Our Securities Fraud Law Firm
If you believe that you too were the victim of securities fraud involving Mr. Hahn or another broker, please contact Shepherd Smith Edwards and Kantas, LTD LLP today to request your free case evaluation. You may have reason to file your own stockbroker fraud claim.

Ex-Merrill, Deutsche Bank Broker Ordered to Pay Client $11 Million, Fox, April 5, 2013

U.S. panel orders Deutsche Bank, ex-adviser to pay $934,000, Reuters, February 14, 2013

More Blog Posts:
Court Upholds Ex-NBA Star Horace Grant $1.46M FINRA Arbitration Award from Morgan Keegan & Co. Over Mortgage-Backed Bond Losses, Stockbroker Fraud Blog, October 30, 2012

UBS Loses Appeal to Have FHFA’s $6.4 Billion MBS Fraud Lawsuit Dismissed, Institutional Investor Securities Blog, April 18, 2013

June 13, 2012

Securities Law Roundup: Ex-Sentinel Management Group Execs Indicted Over Alleged $500M Fraud, Egan-Jones Rating Wants Court to Hear Bias Claim Against SEC, and Oppenheimer Funds Pays $35M Over Alleged Mutual Fund Misstatements

Former Sentinel Management Group Inc. CEO Eric Bloom and head trader Charles Mosley have been indicted for allegedly defrauding investors of about $500 million prior to the firm’s filing for bankruptcy protection in 2007. The government is seeking forfeiture of approximately that amount.

The two men are accused of fraudulently getting and retaining “under management” this money by misleading clients about where their money was going, the investments’ value, and the associated risks involved. According to prosecutors, defendants allegedly used investors’ securities as collateral to get a loan from Bank of New York Mellon Corp. (BK), in part to buy risky, illiquid securities. Bloom is also accused of causing clients to believe that Sentinel’s financial problems were not a result of these risky purchases, the indebtedness to the BoNY credit line, and too much use of leverage.

In other securities law news, Egan-Jones Rating Co. wants the Securities and Exchange Commission’s attempts to pursue claims against it in an administrative forum instead of in federal court blocked. The credit rating agency, which has long believed that the SEC does not treat it fairly even as it “historically coddled and excused” the larger credit raters, contends that if it were forced to make its defense in an administrative hearing it would not be able to avail of its constitutional due process rights due to the SEC’s bias.The Commission’s administrative claims accuse Egan Jones and its president Sean Egan of allegedly making “material misrepresentations” in its 2008 registration application to become a nationally registered statistical rating agency for government and asset-backed and securities issuers.

Egan-Jones filed a complaint accusing the SEC of “institutional bias,” as well as of allegedly improper conduct when examining and investigating the small credit ratings agency (including having Office of Compliance Inspections and Examinations staff go “back and forth between divisions and duties” to engage in both examination and enforcement roles.)The credit rater is also accusing the Commission of improperly seeking civil penalties against it under the Dodd-Frank Wall Street Reform and Consumer Protection Act, even though the actions it allegedly committed happened way before Dodd-Frank was enacted.

One firm that has agreed to settle the SEC’s administrative action against it is OppenheimerFunds Inc. Without denying or admitting to the allegations, the investment management company will pay over $35 million over allegations that it and its sales and distribution arm, OppenheimerFunds Distributor Inc., made misleading statements about the Oppenheimer Champion Income Fund (OPCHX, OCHBX, OCHCX, OCHNX, OCHYX) and Oppenheimer Core Bond Fund (OPIGX) in 2008.

The SEC contends that Oppenheimer used “total return swaps” derivatives, which created significant exposure to commercial mortgage-backed securities in the two funds, but allegedly did not adequately disclose in its prospectus the year that the Champion fund took on significant leverage through these derivative instruments. OppenheimerFunds also is accused of putting out misleading statements about the financial losses and recovery prospects of the fund when the CMBS market started to collapse, allegedly resulting in significant cash liabilities on total return swap contracts involving both funds. The $35 million will go into a fund to payback investors.

Meantime, Nasdaq Stock Market and Nasdaq OMX Group are proposing a $40M “voluntary accommodation” fund that would be used to payback members that were hurt because of technical problems that occurred during Facebook Inc.’s (FB) IPO offering last month. Nasdaq would pay about $13.7 million in cash to these members, while the balance would be a credit to them for trading expenses.

A technical snafu had stalled the social networking company’s market entry by about 30 minutes, which then delayed order confirmations on May 18, which is the day that Facebook went public. Many investors contend that they lost money as a result of Nasdaq’s alleged mishandling of their purchases, sales, or cancellation orders for the Facebook stock. Some of them have already filed securities lawsuits.

Sentinel Management Chief, Head Trader Indicted in Illinois
, Bloomberg/Businessweek, June 1, 2012

Investors sue Nasdaq, Facebook over IPO, Reuters, May 22, 2012

Credit Rater Egan-Jones, Alleging Bias, Sues To Force SEC Proceeding Into Federal Court, BNA Securities Law Daily, June 8, 2012

OppenheimerFunds to pay $35M to settle SEC charge, Boston.com, June 6, 2012

Continue reading "Securities Law Roundup: Ex-Sentinel Management Group Execs Indicted Over Alleged $500M Fraud, Egan-Jones Rating Wants Court to Hear Bias Claim Against SEC, and Oppenheimer Funds Pays $35M Over Alleged Mutual Fund Misstatements" »

November 19, 2011

Oppenheimer Funds Investors Can Proceed with Their Securities Fraud Lawsuit

A federal court has decided that Oppenheimer municipal bond fund holders can go ahead with their securities fraud complaint against Oppenheimer Funds. The plaintiffs of In re Oppenheimer Rochester Funds Group Securities Litigation are alleging federal securities law violations. Funds involved included:

• AMT-Free Municipals Fund
• Rochester National Municipals Fund
• AMT-Free New York Municipals Fund
• Rochester Fund Municipals
• California Municipal Fund
• Pennsylvania Municipal Fund
• New Jersey Municipal Fund

The shareholders of seven municipal bonds had their securities fraud lawsuits consolidated into one case in two years ago. They are claiming that the Oppenheimer Funds neglected to reveal in their registration and prospectus statements that risks were being taken that weren’t in line with their declared strategy and investment goals. The investors argued that even as the funds explicitly said that preserving capital was a clear investment goal, the true objective was one of “high-risk, high-return.” Seeing as certain market conditions were foreseeable, the shareholders believe this placed their capital at great, undisclosed risk, which did come to fruition during the credit crisis of 2007-2008. This is when the Funds’ holding in highly leveraged, complex securities set off cash reserve and payment duties that required for the assets be sold under conditions that most likely were not to the funds’ advantage. The plaintiffs say that because of this, the funds underperformed compared to other municipal bond funds.

They are also claiming that the significant drop in the Funds’ shares’ values can be linked to the deviations between the stated and actual objectives. After investors were notified in October and November 2008 via prospectus supplements of what the Funds’ investments true liquidity risks were, share prices then went crashing. The net asset value of the 7 funds dropped by about 30-50% that year while similar municipal bonds only went down by 10-15%.

The defendants moved to dismiss the consolidate case, claiming that the investors’ losses were triggered by the credit crisis and not because of what was written (or not included) in the funds’ prospectuses. They also argued that they were making a forward-looking statement when they made the “preservation of capital” a goal and had adequately disclosed the risks involved.

In the U.S. District Court, District of Colorado, the federal judge turned down the Defendants’ motion to toss out the consolidated lawsuits. Judge John L. Kane, Jr. also rejected their claim that federal securities laws exempts mutual funds from liability because drops in those funds’ value are a result of corresponding downturns in the funds’ investments’ value and not of statements (whether true or false) in their prospectuses.

Oppenheimer Rochester Funds Lose Dismissal Bid, Face Trial, Bloomberg/Business Week, October 25, 2011

Oppenheimer Muni Bond Investors May Sue Over Alleged Misstatements in Prospectuses, BNA Securities Law Daily, October 26, 2011

More Blog Posts:
8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement, Stockbroker Fraud Blog, August 17, 2011

Oppenheimer Champion Income Fund Resulted In Significant Financial Losses for Investors from Citigroup, UBS, Merrill Lynch, and Other Large Financial Firms, Stockbroker Fraud Blog, August 16, 2010

Chase Investment Services Corporation Ordered by FINRA to Pay Back $1.9M for Unsuitable Sales of Floating-Rate Loan Funds and UITs, Institutional Investor Securities Blog, November 19, 2011

Continue reading "Oppenheimer Funds Investors Can Proceed with Their Securities Fraud Lawsuit" »

August 17, 2011

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement

Our securities fraud lawyers would like to remind you that if you want to opt out of the $100M class action settlement with Oppenheimer Mutual Funds you have to do so by August 31, 2011. OppenheimerFunds Inc. agreed to pay that amount over accusations that it mismanaged its Oppenheimer Champion Fund (OCHBX, OPCHX and OCHCX) and its Oppenheimer Core Bond Fund (OPIGX). The class action was filed by investors accusing OppenheimerFunds of misrepresenting in its offering documents the degree of risk involved in complex securitized instruments, including mortgage-backed securities and credit default swaps.

Under the class action agreement, Champion Fund investors are to be paid $52.5 million. Core Bond investors are to receive $47.5 million. While this amount may seem like a lot, with thousands of class action claimants, Core Bund Fund investors will likely receive approximately 12 cents on the dollar, while Champion Fund investors will receive about 3 cents on the dollar.

This is not a lot of money for your losses, which is why you may want to seriously consider opting out of the class action and pursuing your own securities lawsuit or arbitration claim. Please contact our stockbroker fraud law firm today and ask for your free case evaluation.

You have until August 31, 2011 to send a written exclusion to the class counsel. Your letter cannot be postmarked after the deadline. Failure to opt out will prevent you from filing your own case at a later today. You should, however, get your share of the settlement.

OppenheimerFunds is a Massachusetts Mutual Life Insurance Company subsidiary. Defendants of the class action were charged with violating the Investment Company Act of 1940 and the Securities Act of 1933.

The Oppenheimer Core Bond Fund lost at least 33% of its value in 2008. During the first three months of 2009 it lost another 10%. The bond was promoted as appropriate for and offered by a number of 529 college savings plans, a number of annuities, and retirement plans. The Champion Fund lost about 80% of its value in 2008.

While staying part of a class action in a securities case may appear to be the easy way to recover your investment losses, this is truly not the case. Why should you get back so much left when you’ve lost so much?

By retaining the services of an experienced securities fraud law firm, you increase your chances of recovering the maximum amount possible. We know how devastating it can be to lose money that you have worked so hard for and saved.

OppenheimerFunds Settles Mismanagement Case for $100 Million, Bloomberg Businessweek, July 26, 2011

OppenheimerFunds to pay $100 million to settle mismanagement case, Denver Post, July 27, 2011

More Blog Posts:
Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011

Class Members of Charles Schwab Corporation Securities Litigation Can Still Opt Out to File Individual Securities Claim, Stockbroker Fraud Blog, December 6, 2010

Wells Fargo Settles Mortgage-Backed Securities Class Action Case for $125M, Institutional Investor Securities Blog, July 19, 2011

Continue reading "8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement " »

January 29, 2011

Yet Another Securities Case Against a Financial Firm Alleged to Have Aided Enron in its Scams is Dismissed Without Liability in Texas!

Many financial firms settled claims filed by those defrauded in the Enron debacle. Meanwhile, many more Enron securities fraud cases have been dismissed by a court system riddled with special interest influence. No financial firm has been held liable and certain individuals at those firms were held liable only to have their convictions reversed. Thus, perhaps the largest, most notorious and most brazen fraud ever perpetuated by a publicly traded firm against its own shareholders will end not with a bang, but with a whimper.

Earlier this month, securities charges against Deutsche Bank Securities Inc. were dropped in the U.S. District Court for the Southern District of Texas. The financial firm was accused of fraudulently getting two entities to buy beneficial ownership interests in Osprey Trust. The special purpose entity was allegedly secured using worthless investments bought from Enron. The plaintiffs contend that the assets were “dumped” into Osprey as part of a bigger scheme to defraud investors and manipulate Enron’s financial statements.

The court said that because the plaintiffs did not specify any affirmative misrepresentation made by a Deutsche Bank official, they did not and “cannot plead with particularity either scienter on the part of a Deutsche Bank speaker or writer or reasonable reliance … on a claimed misrepresentation.” The court also said that the financial firm’s stated motive for alleged defraud, which allegedly was for tax benefits and high fees, is a common incentive among financial firms and their officers and therefore is not enough for stating “a claim for fraud” under the laws of Texas and New York.

Related Web Resources:
Newby, et al v. Enron Corporation, et al., U.S. District Court for the Southern District of Texas

The Fall of Enron, Chron.com

Continue reading "Yet Another Securities Case Against a Financial Firm Alleged to Have Aided Enron in its Scams is Dismissed Without Liability in Texas! " »

August 16, 2010

Oppenheimer Champion Income Fund Resulted In Significant Financial Losses for Investors from Citigroup, UBS, Merrill Lynch, and Other Large Financial Firms

If you are an investor who suffered losses because you invested in the Oppenheimer Champion Income Fund, do not hesitate to contact our securities fraud law firm to request your free case evaluation. Unfortunately, many investors were not apprised of the risks they were taking on when they placed their money in these high risk, very illiquid derivatives. Many of these securities victims were clients of large brokerage firms, such as UBS, Citigroup Smith Barney, Wachovia, Linsco Private Ledger LPL, Merrill Lynch, UBS, ING, Stifel, and Gun Allen.

Thousands of investors were led to believe, via the prospectus, the financial advisers, and the marketing collateral, that the Oppenheimer Champion Income Fund was a high income fund that wasn’t much riskier than a high income fund peer group or a conservative high income fund. Unfortunately, this was not the case at all, and many investors ended up sustaining major losses when the fund lost 79.1 for the 2008 calendar year.

Oppenheimer Champion Income Fund
Hoping that commercial mortgage-backed securities would rally, the fund had placed a large bet in high risk derivatives, such as credit default swaps and mortgage backed securities—not to mention total-return swaps in 2006. Unfortunately, this is not what ended up happening.

In September 2008 alone, credit default swaps declined by $238 million. It was during this time that the fund sold credit default swaps on beleaguered companies, including Tribune Co., Lehman Brothers Holdings Inc., General Motors Corp, and American International Group Inc. The fund also raised its gamble on mortgage-related bonds that, with defaults rising, started to fail.

Hundreds of millions of dollars has reportedly been lost, and the fund’s investors have not been the only ones to suffer financial losses. Over 10% of the fund was held by other OppenheimerFunds offerings, including funds that bundled a number of the firm’s products together.

Related Web Resources:
Oppenheimer Champion Income Fund, MorningStar

FINRA Arbitration and Mediation

Continue reading "Oppenheimer Champion Income Fund Resulted In Significant Financial Losses for Investors from Citigroup, UBS, Merrill Lynch, and Other Large Financial Firms" »

April 21, 2009

Oregon’s Attorney General Files $36 Million Lawsuit Against OppenheimerFunds

Last week, the Oregon’s Attorney General sued OppenheimerFunds Inc. for allegedly mismanaging the state’s 529 College Savings Plan when it recommended a bond that took risks that were not in alignment with the Plan’s conservative investment objectives. The 529 College Savings Plan allows investors to avail of tax benefits while they save for their children’s college education.

According to the $36 million securities fraud lawsuit, the defendants had signed a contract agreeing to recommend only funds that were consistent with the Oregon 529 College Savings Board's investment policy and would let the board know about any fund changes. Also, as an investment adviser, OppenheimerFunds had fiduciary duties it owed the board. The complaint contends that the defendants breached their fiduciary and contractual duties by continuing to recommend the Oppenheimer Core Bond Fund even after it took part in risky leverage and speculative bets with derivatives.

According to the lawsuit, the Oregon College Savings Plan Trust retained the services of OppenheimerFunds to put together, manage, and make recommendations for its portfolios. All recommendations had to be compatible with each portfolio’s objectives.

When OppenheimerFunds initially recommended the Core Bond Fund, the bond was a “straightforward” bond fund that was primarily invested in high quality corporate bonds. That is, until sometime between 2007 and 2008 when fund managers allegedly began taking part in credit default swaps and total return swaps. This, says the lawsuit, dramatically changed the risk profile of the fund.

Yet OppenheimerFunds failed to let the board know about this change until January 22. The fund lost more than 35% of its value in 2008 and another 10% during the first three months of 2009. The complaint says that rather than moderate the degree of risk, OppenheimerFunds increased the risks.

OppenheimerFunds maintains that significant losses occurred as a result of market volatility and not due to dramatic changes in investment strategies and that the Board was notified of all changes. The investment adviser says it is extremely disappointed with the lawsuit and expressed concern that an outside lawyer, and not the state, conducted the probe into the case.

However, Keith S. Dubanevich, the special counsel in the Oregon attorney general’s office, says it is their common practice to retain outside help when dealing with certain areas of law, including securities fraud, and that Oregon’s Justice Department did lead the investigation.

Related Web Resources:
Oregon Sues Over Risks Taken In Its '529' Fund, The Wall Street Journal, April 14, 2009

Oregon 529 College Savings Network

Oregon Attorney

Continue reading "Oregon’s Attorney General Files $36 Million Lawsuit Against OppenheimerFunds" »

November 20, 2008

Massachusetts Top Securities Regulator Charges Oppenheimer & Co with Unethical Conduct and Fraud

Massachusetts Secretary of State William Galvin is charging Oppenheimer & Co. with unethical conduct and fraud. The state’s top securities regulator is accusing the investment bank of continuing to market and sell auction rate securities to clients even as Oppenheimer executives were getting rid of their own ARS holdings, worth $3 million, before the collapse.

Galvin says that Oppenheimer Chairman and Chief Executive Albert Lowenthal and other firm executives kept clients and other firm employees “in the dark” about the collapsing ARS market. His office is seeking to revoke Lowenthal’s broker-dealer registration in Massachusetts because he says that the CEO and other Oppenheimer executives “betrayed” their clients’ trust. This is the first time that a state regulator has charged one of the smaller brokers for its alleged involvement in the sale of auction-rate securities while the market was failing.

Galvin says that Oppenheimer clients in Massachusetts are unable to access some $56 million because their ARS investments have been frozen since February. Also named in Galvin’s complaint are ARS Managing Director Greg White and Senior Managing Director Robert Lowenthal.

Oppenheimer and its firm executives are denying Galvin’s allegations. On Tuesday, the investment bank issued a statement claiming that its employees had no knowledge of the kinds of actions that their larger firm counterparts engaged in that contributed to the ARS market collapse. The investment bank also maintains that its executives personally bought and sold ARS during the period noted in Galvin's complaint, and they continue to hold a number of these securities.

Oppenheimer says it is working with financing sources and regulators to help investors cash out of their ARS.

Related Web Resources:

Massachusetts sues Oppenheimer & Co over ARS sales, Reuters, November 18, 2008

Galvin blasts Oppenheimer & Co. over auction-rate securities, Boston Herald, November 18, 2008

Related Web Resources:

Read the Complaint (PDF)

View the Exhibits (PDF)

Oppenheimer & Co.

Continue reading "Massachusetts Top Securities Regulator Charges Oppenheimer & Co with Unethical Conduct and Fraud" »

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.

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.

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

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

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.