Oppenheimer Co. Inc. a securities broker dealer headquartered in New York New York has been censured and fined $800,000.00 by Financial Industry Regulatory Authority (FINRA) based upon findings that the securities broker dealer neglected to adequately supervise its stockbrokers’ unit investment trust trades in customer accounts. Letter of Acceptance Waiver and Consent No. 2016050948101 (Dec. 30, 2019).
According to the AWC, between 2011 and 2015, more than $6,400,000,000.00 in unit investment trust transactions had been effected by Oppenheimer which produced sales charges of $68,600,000.00. FINRA stated that $753,900,000.00 in transactions involved a unit investment trust purchase being made with proceeds from a previously held unit investment trust position that was sold one hundred days prior to its maturity. Also, $237,100,000.00 of the proceeds involved an early rollover where a previously held unit investment trust was switched for another unit investment trust in a subsequent series. This resulted in customers prematurely selling unit investment trust positions only to purchase other unit investment trust positions containing similar or the same objectives.
The AWC stated that Oppenheimer neglected to implement a supervision system and written supervisory procedures geared towards supervising stockbrokers’ recommendations for suitability in regard to early unit investment trust rollovers. FINRA stated that unit investment trusts were classified in written supervisory procedures as long-term investments, and the procedures noted that frequent switches or trades could constitute inappropriate transactions. Those procedures neglected to detail anything about early rollovers though.
The AWC stated that there were no automated alerts, reports or other systems used by the securities broker dealer for purposes of evaluating inappropriate rollovers of unit investment trust products. The securities broker dealer depended on branch managers to manually review the transactions, but with a lack of information contained in Oppenheimer’s supervisory procedures regarding early rollovers, the securities broker dealer’s process for identifying and preventing unsuitable switches was deficient. In fact, the trade report reviewed by Oppenheimer failed to show whether stockbrokers advised customers to make inappropriate rollovers or whether stockbrokers possibly caused customers to pay as much as $3,874,206.90 in unnecessary sales charges. FINRA found that Oppenheimer’s conduct constituted violations of FINRA Rules 2010 and 3110 as well as NASD Rule 3010.
