Oppenheimer & Co. Broker Misconduct, Regulatory Actions

The White Law Group reviews the regulatory history of Oppenheimer & Co. 

Oppenheimer & Co., (CRD#: 249/SEC#: 801-887,8-4077) headquartered in New York, New York, is a national financial advisory firm. According to its FINRA Broker Report, the firm reportedly has 283 disclosure events on its broker record including 101 regulatory actions and 179 arbitrations.

Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among others. They can have serious consequences for a broker-dealer’s profile and reputation. The following is a review of FINRA and the SEC’s regulatory actions involving Oppenheimer & Co.

Failure to Supervise – Oppenheimer & Co.

May 7, 2024, Oppenheimer & Co. Inc. reportedly settled with the Financial Industry Regulatory Authority (FINRA), agreeing to pay a $500,000 fine. The settlement comes after FINRA alleged that Oppenheimer failed to properly supervise transactions between 2012 and 2017, leading to approximately 490,000 transactions for over 14,000 clients not being properly recorded.

Additionally, Oppenheimer was accused of not collecting necessary information for customers’ investment profiles, violating FINRA rules. These violations include Rule 3110(a) which requires firms to establish and maintain systems for supervision and Rule 2111 which mandates suitable recommendations for customers based on their investment profiles.

This is not the first time Oppenheimer has faced scrutiny from FINRA, as they were ordered to pay $14 million to victims of a Ponzi scheme the previous year.

Ponzi Scheme Targeted Senior Investors

May 10, 2023 FINRA mandated Oppenheimer & Co. Inc. to pay nearly $14 million to victims of an alleged Ponzi scheme led by a former Oppenheimer broker, targeting 400 elderly investors. John J. Woods, the broker, purportedly orchestrated the scheme through Horizon Private Equity III fund, established in 2008 at an Oppenheimer branch in Atlanta.

The Securities and Exchange Commission (SEC) charged Woods and his firm, Livingston Group Asset Management Company, for securities fraud in August 2021, uncovering a $110 million Ponzi scheme. A FINRA panel found Oppenheimer culpable for failing to supervise Woods and others involved, resulting in compensatory and punitive damages totaling $13,979,404.

Failure to Supervise Unit Investment Trust Sales

December 2019 Oppenheimer & Co. agreed to pay nearly $4.7 million to settle allegations that it failed to properly supervise $6.4 billion worth of unit investment trust sales over five years, according to the Financial Industry Regulatory Authority.

The penalty reportedly includes an $800,000 fine and $3.87 million in restitution to customers who may have incurred excessive charges as a result of recommendations that they sell their UITs before their maturity date and buy similar investments with the proceeds, according to a letter of acceptance, waiver and consent signed by the firm and Finra.

Oppenheimer did not use automated reports or alerts reasonably designed to help it identify unsuitable UIT transactions, according to FINRA. Almost $754 million of UIT trades at the firm between January 2011 and December 2015 involved early rollovers, Finra said.

Poor Reporting Practices

November 2016 – FINRA sanctioned Oppenheimer & Co., Inc.  $3.4 million for poor reporting practices, including internal discipline, providing information in arbitration cases and offering sales discounts to customers.

The firm was reportedly late making 365 filings with FINRA regarding disciplinary actions it took against its own brokers and arbitration and litigation settlements over an eight year period, from 2008 to 2016.

The report also stated that from 2010 to 2013, Oppenheimer allegedly did not provide documents to seven claimants in an arbitration case against former registered representative Mark Hotton. (See Mark Hotton: American Greed) Oppenheimer has already paid $6 million to settle claims in that case.

Further, Oppenheimer was fined for allegedly overcharging 825 customers $1,010,327 between 2009 and 2015 for mutual fund shares because it did not apply the appropriate fee waiver.

Reportedly, FINRA fined Oppenheimer $1.575 million and required restitution to be paid:  $703,122 to the arbitration claimants and $1,142,619 to its mutual fund customers. The firm accepted the penalty without admitting or denying FINRA’s charges.

Unsuitable Sales of Exchange Traded Funds (ETFs)

July 2016 – FINRA fined Oppenheimer & Co. Inc. $2.25 million and ordered the firm to pay restitution of more than $716,000 to affected customers for selling leveraged, inverse and inverse-leveraged exchange-traded funds (ETFs) to retail customers without reasonable supervision, and for recommending these non-traditional ETFs that were not suitable.

According to FINRA,  while Oppenheimer instituted policies in August 2009 prohibiting its representatives from soliciting retail customers to purchase non-traditional ETFs, and also prohibiting them from executing unsolicited non-traditional ETF purchases for retail customers unless the customers met certain criteria, e.g., the customer had liquid assets in excess of $500,000, the BD failed to “reasonably enforce these policies.”

Oppenheimer instituted the policies in August 2009, in response to FINRA Regulatory Notice 09-31, which advised broker-dealers of the risks and inherent complexities of certain non-traditional ETFs.

But because Oppenheimer failed to enforce the policies (according to FINRA), its reps continued to solicit retail customers to purchase non-traditional ETFs and continued to execute unsolicited non-traditional ETF transactions even though the customers did not meet Oppenheimer’s stated criteria.

FINRA further alleged that from August 2009 through September 2013, more than 760 Oppenheimer reps executed more than 30,000 non-traditional ETF transactions totaling approximately $1.7 billion for customers.

Sales of Unregistered Penny Stocks

February 2015 – Oppenheimer & CO. recently agreed to admit wrongdoing and pay $10 million to settle SEC’s charges that it allegedly sold penny stock in unregistered offerings. Oppenheimer will also pay an additional $10 million to settle a parallel action with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)

The SEC alleged Oppenheimer engaged in two courses of misconduct. The first involved aiding and abetting the illegal activity of a customer, Gibraltar Global Securities. Gibraltar Global Securities is a brokerage firm in the Bahamas that is not registered in the U.S. “Oppenheimer executed sales of billions of shares of penny stocks for a supposed proprietary account in Gibraltar’s name while knowing or being reckless in not knowing that Gibraltar was actually executing transactions and providing brokerage services for its underlying customers, including many in the U.S.”

The second course of misconduct again involved Oppenheimer engaging on behalf of another customer in unregistered sales of billions of shares of penny stocks. The SEC’s investigation found that Oppenheimer was paid $588,400 in commissions. In both circumstances the Oppenheimer’s liability stems from the firm’s inability to respond to redflags involving the sale of unregistered securities.

 August 2012 – Oppenheimer & Co was fined $1,425,000 for selling unregistered penny stocks and for failing to have implemented an adequate anti-money laundering (AML) program to detect suspicious transactions. In addition to the fine, Oppenheimer was ordered to hire an independent consultant to evaluate and review the firms’ penny stock and AML policies.

FINRA reportedly found that between 2008 and 2010 Oppenheimer sold more than a billion shares of unregistered speculative penny stocks through their branch offices across the United States. The stocks were purchased in large block quantities and deposited by customers shortly after opening their accounts, and then liquidated shortly thereafter. The transactions should have raised red flags and prompted Oppenheimer to investigate whether or not the penny stocks were registered.

Oppenheimer & Co. Broker Misconduct and Customer Complaints 

There have been several cases of registered representatives employed by Oppenheimer & Co.who were allegedly involved in broker misconduct and fraudulent activities. 

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. 

July 2022 – Former Oppenheimer broker based in Chesterfield, MO was barred after he reportedly failed to provided information in FINRA’s investigation. Oppenheimer reportedly terminated him following a customer complaint alleging he took a loan from customer. The customer later clarified that he provided the money for a private investment away from the Firm and was only paid a small percentage back.

 April 2018 – Former Oppenheimer Advisor David Krumrey was reportedly barred from the securities industry after he failed to request termination of his suspension within three months of the date of the Notice of Suspension.

According to his broker profile, Krumrey was reportedly registered with Oppenheimer & Co. in The Woodlands, TX from 2009 until 2017 when he was reportedly dismissed for “attempting to settle a complaint away from the Firm.”

His broker report indicates six customer complaints have been filed against him since 2017, with one reportedly still pending from April 2020. Allegations include unsuitability, breach of fiduciary duty and negligence, among others.

June 2016 – The FINRA Department of Enforcement filed a complaint alleging that while associated with Oppenheimer, Maximilian Santos withdrew a total of $198,800 from his personal bank account at JP Morgan Chase in 24 transactions structured to cause the bank to fail to file a Currency Transaction Report (“CTR”).

Santos consented, without admitting or denying the allegations, to a bar in all capacities from associating with any FINRA member firm.

Maximillian Santos was registered with Oppenheimer & Co, Inc. from March 2001 until he was reportedly terminated after determining that he was sharing confidential client information with a third party by using a non-firm email address.

Free Consultation with a Securities Attorney

The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.

If you have concerns regarding investments you purchased through Oppenheimer & Co.and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.