FINRA orders Oppenheimer to pay $4.6M over alleged excessive sales charges
Oppenheimer & Co. must pay $4.6 million for alleged supervisory failures and potentially excessive sales charges related to rollovers of unit investment trusts, according to a FINRA order.
It’s the latest case to involve UITs and advisors’ investment recommendations, which have drawn regulatory scrutiny.
Though UITs are generally intended to be long-term investments, Oppenheimer’s supervisory systems did not identify that its brokers recommended clients engage in potentially unsuitable early rollovers of the investments, FINRA said. These recommendations may have caused clients to pay more than $3.8 million in sales charges that they would not have incurred had they held their UITs until their maturity dates, according to the regulator.
From 2011 to 2015, Oppenheimer executed more than $6.4 billion in UIT transactions; $753.9 million of which were early rollovers, according to FINRA.
The firm neither admitted nor denied the charges, but consented to FINRA’s findings. A spokeswoman for Oppenheimer declined to comment on the case.
Though FINRA ordered Oppenheimer to pay $3.8 million in restitution to clients and $800,000 in fines for supervisory lapses, it credited the firm with “extraordinary cooperation” during its investigation into the matter.
Other firms to face scrutiny over UIT rollover practices in recent years include Raymond James, which reached a $15 million settlement with the SEC for allegedly collecting excess commissions and failing to conduct adequate suitability reviews. In 2017, FINRA ordered Morgan Stanley to pay $13 million failing to properly supervise short-term trades of UITs.