FINRA: Oppenheimer reporting and supervisory failures kept regulator from knowing about employee misconduct
FINRA fined Oppenheimer $1.57 million for a string of alleged reporting and supervisory failures that kept the regulator in the dark about employee misconduct and key regulatory matters. It also ordered the firm to pay $1.85 million to customers for a variety of related infractions.
FINRA accused Oppenheimer of neglecting to notify the regulator on a timely basis of securities-related regulatory findings as well as disciplinary actions it had taken against employees and settlements of securities-related arbitration and litigation claims. In total, Oppenheimer failed to make timely reports on more than 350 required filings, FINRA claims.
The regulator was also critical of Oppenheimer for failing to timely disclose that its then anti-money-laundering compliance officer and another employee had received Wells notices from the SEC.
The violations persisted even after the firm revised its supervisory procedures as a result of a prior FINRA investigation, the regulator said.
"It's important for firms to ensure their supervisory programs are designed to comply with FINRA reporting requirements and that their procedures provide adequate direction to their employees to make required filings," Brad Bennett, FINRA's chief of enforcement, said in a statement.
FINRA also criticized the firm for failing to produce documents in discovery to clients who filed arbitration claims. The regulator singled out a customer arbitration filed against Mark Hotton, a former registered rep who was sentenced to more than 11 years in prison for defrauding several people and companies of more than $9 million. Oppenheimer failed to provide seven arbitration claimants spreadsheets showing that Hotton had excessively traded multiple customer accounts, FINRA said.
FINRA ordered Oppenheimer to pay the claimants more than $700,000 and provide them with copies of the documents that were not produced.
The firm has paid more than $6 million to resolve customer arbitration claims related to its supervision of Hotton. In addition, it was ordered by FINRA in a previous investigation to pay $1.25 million in restitution to 22 additional customers who suffered losses but did not file arbitration claims.
“The announced settlement includes a number of legacy issues that Oppenheimer self-reported in part as a result of enhanced procedures put in place by the firm," Jacqui Emerson, a spokeswoman for Oppenheimer, said in a statement. "Over the past several years, we have upgraded personnel, strengthened policies, procedures and controls, and undertaken significant technology initiatives to mitigate future reporting issues.”
Oppenheimer neither admitted nor denied the charges but consented to an entry of FINRA's findings.
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In the settlement, FINRA also took Oppenheimer to task for failing to supervise the application of sales charge waivers to eligible mutual fund sales. FINRA claimed that the firm relied on its financial advisers to determine the applicability of sales charge waivers, but failed to maintain adequate written policies or procedures to assist advisers in making this determination.
The firm was ordered to pay eligible customers $1.14 million in remediation to customers who qualified for, but did not receive, applicable mutual fund sales charge waivers.