New York broker-dealer Oppenheimer & Co. has agreed to pay a $500,000 fine to resolve allegations by the Financial Industry Regulatory Authority (FINRA) concerning its failure to properly supervise certain trades. These trades, conducted directly by brokers with fund companies on behalf of customers, highlighted significant lapses in oversight and regulatory compliance within the firm.
Supervisory Lapses Over Five Years
From 2012 to 2017, Oppenheimer did not sufficiently analyze approximately 490,000 transactions where brokers placed orders directly with mutual fund providers. This failure impacted over 14,000 customers, as these transactions bypassed the firm’s reporting system intended to identify potential sales practice violations. According to FINRA’s letter dated May 7, this omission meant that the trades were not subjected to the necessary scrutiny to ensure regulatory compliance.
Lack of Proper Customer Profile Information
In addition to the supervisory failures, Oppenheimer did not ensure that brokers were gathering comprehensive customer profile information. Essential data such as age, investment time horizon, and liquidity needs were not collected, preventing the firm from verifying the suitability of the brokers’ recommendations. The absence of this information meant that even a retroactive review of these unreported trades in 2021 could not adequately address suitability concerns.
Violations of FINRA Rules
Oppenheimer’s actions were found to violate several FINRA rules. Rule 3110 requires brokerages to maintain reasonable supervision, while Rule 4511 mandates the accurate preservation of books and records. Additionally, Rule 2010 calls for maintaining high standards of commercial honor. Oppenheimer, which employs about 1,900 brokers, accepted the disciplinary measures without admitting or denying the allegations.
Previous Disciplinary Actions
This is not the first time Oppenheimer has faced disciplinary actions from FINRA. In 2021, the brokerage was censured and fined $525,000 for allegedly misrepresenting cost basis information on over 1,000 customer account statements and tax forms. Earlier, in 2016, Oppenheimer agreed to a $1.6 million fine and restored $1.85 million to customers for a range of supervisory and operational violations, including issues related to arbitration hearings, reporting lapses, and sales charge waivers.
Protect Your Investments with Proper Supervision
The recent settlement emphasizes the importance of robust supervision and compliance in managing investments. At Reif Law Group, we understand the complexities of financial regulations and are committed to ensuring your investments are managed with the highest standards of oversight.
Contact Reif Law Group for Investment Disputes
If you have an investment dispute with Oppenheimer or any other broker-dealer, we are here to help. Our experienced legal team specializes in financial litigation and regulatory compliance, providing you with the expert guidance and support needed to protect your investments.
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