Oppenheimer to pay $ 4.7 million for ITU overthrow violations


December 30, 2019

Oppenheimer & Co. has agreed to pay nearly $ 4.7 million to settle allegations that it failed to properly oversee sales of $ 6.4 billion in investment fund shares over five years, a the Financial Industry Regulatory Authority announced Monday.

The penalty includes a fine of $ 800,000 and $ 3.87 million in compensation to customers who may have incurred excessive charges as a result of recommendations that they sell their ITUs before their due date and purchase similar investments with the product, according to a letter of acceptance, waiver and consent signed by the firm and Finra.

Oppenheimer did not use reasonably designed automated reports or alerts to help him identify inappropriate ITU transactions, the regulator said. Almost $ 754 million in ITU transactions within the company between January 2011 and December 2015 involved early renewals, Finra said.

Oppenheimer, who also agreed to censorship from Finra, accepted the sanctions without admitting or denying the findings.

In determining the fine, Finra gave the cooperation of a New York-based company the credit for hiring an external consultant to analyze its ITU transactions, for sharing the results with the examiners and for having voluntarily put corrective measures in place, the regulator said in a press release.

ITUs typically have maturity dates of 15 to 24 months and have upfront and deferred sales charges, as well as creation and development charges tailored to hold them to maturity. Finra has isolated supervisory checks aimed at identifying redemptions and early renewals of ITU in order to generate excess commissions as Regulatory and review priority in 2018.

A spokeswoman for Oppenheimer declined to comment.

“FINRA member companies should be aware of the costs to customers when recommending a product, especially when recommending customers to make short-term sales of products intended to be long-term investments,” said said Jessica Hopper, Finra’s Acting Law Enforcement Officer. “Providing feedback to investors remains a top priority. “

Finra and the Securities and Exchange Commission have imposed millions of dollars in fines and restitution orders against member companies for ITU-related oversight breaches.

In September, Raymond James Financial agreed to pay $ 15 million fines and restitution as part of an SEC settlement related in part to sales issues at the ITU. Finra fined Morgan Stanley $ 3.25 million in 2017 and ordered it to pay customers $ 10 million for similar allegations of non-monitoring of ITU sales.

Regulators also suspended individual brokers on ITU sales practices.


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