Oppenheimer & Co to Pay $ 3.8 Million in Compensation for Supervisory Breaches Involving Mutual Funds


FINRA also fined the company $ 800,000 for its failure to reasonably oversee ITU’s early renewals.

The United States Financial Sector Regulatory Authority (FINRA) has earlier today ad the imposition of a fine of $ 800,000 on Oppenheimer & Co. Inc. for failing to reasonably supervise the initial renewals of Unit Investment Trusts (UITs). FINRA also ordered Oppenheimer & Co. Inc. to pay more than $ 3.8 million in damages to customers who incurred potentially excessive sales charges due to the early reversal of UITs.

FINRA explains that ITUs are generally designed as long-term investments and have selling costs based on their long-term nature, including upfront and deferred selling costs and creation and development costs. A registered representative who recommends that a client sell their ITU position before the expiry date and then “carry over” those funds to a new ITU results in increased selling costs over time, which raises sales issues. ‘adequacy.

From January 2011 to December 2015, Oppenheimer executed more than $ 6.4 billion in ITU transactions, including $ 753.9 million in early rollovers. FINRA found that the company’s written procedures and monitoring system – which did not involve the use of automated reports or alerts – were not reasonably designed to monitor the adequacy of these early extensions. As a result, Oppenheimer failed to identify that its representatives recommended potentially inappropriate early renewals that, collectively, could have resulted in customer selling expenses of more than $ 3.8 million that they did not incur. whether they had held the ITUs until their expiration date.

In deciding on the fine imposed on Oppenheimer, FINRA acknowledged the company’s cooperation to have

  • (1) provided substantial assistance to the FINRA investigation, including engaging an external consultant to analyze the company’s ITU transactions and voluntarily sharing the results of the consultant’s analysis with FINRA;
  • (2) developed and implemented a methodology to effectively identify customers eligible for restitution; and
  • (3) Has voluntarily taken corrective action to revise its procedures to avoid recurrence of the conduct described above, including establishing automated alerts to identify when representatives recommend early ITU renewals.

In settling this case, Oppenheimer neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.


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