Aug 3, 2020
A former Oppenheimer broker with 28 years of experience and a clean criminal record accepted a fine and suspension for allegedly encouraging clients to prematurely sell mutual funds and use the proceeds to buy new ones in violation of a rule of adequacy.
Frederick Levine recommended at least 950 ITU “early” renewals over nearly three years before resigning Oppenheimer “voluntarily” in 2014 to join RBC Wealth Management, according to a letter of consent, waiver and consent he said. signed with the Financial Sector Regulatory Authority.
About 63% of new purchases made by customers with the proceeds of their sale were from ITUs with the same goals and strategies they sold, according to the Finra decree released on Monday. Levine agreed to a three-month suspension and a $ 5,000 fine, without admitting or denying the app’s findings.
“Levine’s recommendations resulted in unnecessary selling costs for his clients and was not appropriate given the frequency and cost of transactions,” said Finra, noting that passively managed portfolios of securities typically cost buyers 3 % to 4% of the purchase price.
The adviser, a 12-year Oppenheimer veteran who is part of an RBC team of four in Florham Park, NJ, did not immediately return a request for comment.
The fine continues to crack down on abusive ITU renewal recommendations, which Finra says can generate selling costs of up to 12.8% over a two-year period.
Morgan Stanley in 2017 agreed to pay $ 3.5 million and reimburse clients nearly $ 10 million as part of a Finra settlement for failing to oversee ITU sales by hundreds of 2010 brokers. in mid-2014.
Levine appears to have been identified in a focused industry review of ITU transactions between January 2014 and mid-2016 that Finra opened almost four years ago.
He imposed a similar fine of $ 5,000 and a three-month suspension in April on Brian D. Engstrom, another former Oppenheimer broker.
Oppenheimer reimbursed excess selling charges to Levine’s customers in a December $ 3.87 million settlement with Finra, which included a $ 800,000 fine for failing to oversee ITU’s sales on five years.
Earlier this year, Finra fined Cambridge Investment Research, an independent broker, $ 150,000 for improper procedures that failed to alert it to short-term ITU transactions.
Raymond James Financial reached a $ 15 million settlement with the Securities and Exchange Commission last year for, among other allegations, overcharging customers by more than $ 6 million for ITU transactions. RayJay fired at least six brokers for inappropriate ITU recommendations in 2018, sources say.