The NASD is charging Albert Lowenthal, Oppenheimer & Co.’s CEO, with knowingly turning in data that was not complete or accurate when it responded to the self-regulatory agency’s request that the brokerage firm assess its own practices pertaining to mutual fund breakpoint discounts. This latest complaint stems from a report issued in 2003 by NASD and other regulators that demonstrated how almost one in three mutual fund transactions in front-end load mutual funds did not get a breakpoint discount even though they looked to be eligible for one.
Because of this, NASD told about 2,000 brokerage firms that sold front-end load mutual funds during the two years previous to perform their own assessment of self-compliance regarding related requirements and report their findings. Oppenheimer (OPY) was one of the broker-dealers that got this request.
The breakpoint sweep led to investors getting over $130 million back. These are breakpoint discounts they should have received previously.
Breakpoint discounts are usually applied to transactions involving front-end load Class “A” share. This is done to reduce sales loads at the $1M, $250K, $100K, and $50K investment levels. Transactions involving class “B” and “C” shares usually don’t incur front-end sales charges, so they typically do not qualify for breakpoint discounts.
NASD ordered Oppenheimer to look at several hundred front-end load Class “A” share transactions that were effected throughout 2001 and 2002 and provide certain information about these by June 13, 2013. The SRO claims that around that due date, even though Lowenthal found out that the sample, with its number of class “B” and “C” share transactions, was improperly diluted-he allegedly ordered this flawed data to be given to the regulator without giving notice about this discrepancy.
NASD found this deficiency among others in Oppenheimer’s self-assessment submission and immediately told the broker-dealer to do another submission. The SRO says that Lowenthal then had the person who prepared the first assessment to work on the second one, which, NASD contends, had a lot of the same defects as the initial one and that even now the firm has yet to submit the self-assessment.
This is the second time in less than a year that the agency has charged Oppenheimer for not producing information and documents requested. An earlier complaint from 2005 involved reporting violations related to mutual bond transactions.
It is unacceptable for a financial firm to excessively charge an investor for any transactions. Unfortunately, this does happen-especially when excessive rates are applied or necessary discounts are not included-and it is the brokerage firm or investment advisor and its representatives that profits.
If you feel that you were the victim of securities fraud, please contact our investment fraud lawyers at Shepherd Smith Edwards and Kantas, LTD LLP today.