Published on:

FINRA Hits Oppenheimer with a $2.9 Million Fine for Failure to Supervise ETF Sales

Oppenheimer & Co., Inc. (Oppenheimer) has been hit with a fine of $2.25 million and ordered to pay restitution to affected customers of over $716,000 for failing to supervise the unsuitable sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs).

According to FINRA, Oppenheimer failed to enforce its own policies with respect to the solicitation and recommendation of ETFs by its registered representatives. Although Oppenheimer put ETF-related policies in place in 2009 (in response to FINRA Regulatory Notice 09-31), its representatives continued to solicit customers and to execute non-traditional ETF transactions despite the customers not meeting Oppenheimer’s criteria for suitability, e.g. having liquid assets of more than $500,000.  FINRA’s findings state that Oppenheimer representatives carried out more than 30,000 ETF transactions, totaling approximately $1.7 billion during the relevant time period.

FINRA noted several examples of Oppenheimer’s unsuitable ETF sales, including an 89 year old customer with an annual income of $50,000 whose unsuitable ETF hold position resulted in a net loss of $51,847.  Another customer, a 91 year old conservative customer with an annual income of $30,000, incurred a net loss of $11,161 from an unsuitable ETF investment.

According to Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, “Written procedures are worthless unless accompanied by a program to enforce them.” Consequently, Oppenheimer consented to FINRA’s sanctions without admitting or denying the findings.

Supervision within a brokerage firm can take many different forms, and management’s failure on any front, including the failure to enforce policies and procedures, can create grounds for a claim. Among other areas, management should have appropriate supervisory processes in place for the regular review of investor accounts, quality checks to see that the right products are being recommended to investors, and audits to ensure continual compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures.

Have you suffered losses in your Oppenheimer investment account?  Did you purchase an exchange traded fund which was unsuitable in light of your investment goals?  If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors’ rights is the right to be informed!  This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida.  For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues.  The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally!  Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.