Oppenheimer & Co. to Pay $1.4M to FINRA For Allegedly Unregistered Penny Stock Sale & Anti-Money Laundering Violations

The Financial Industry Regulatory Authority says that Oppenheimer & Co. (OPY) will pay a $1,425,000 fine for the purported sale of penny stock shares that were unregistered and for not having an anti-money laundering (AML) compliance program that was adequate enough to identify and report suspect transactions. The financial firm also must get an independent consultant to perform a comprehensive review of its AML procedures, systems, and policies and its penny stock.

According to the SRO, from 8/18/08 to 9/20/10, Oppenheimer sold over a billion shares of twenty penny stock that were low-priced and very speculative but were not registered or lacked an exemption that was applicable. Soon after opening accounts, customers deposited huge blocks of penny stock and then liquidated them, moving proceeds out of the accounts.

FINRA contends that each sale came with “red flags” that should have spurred the firm to additional review to find out whether or not these were registered sales but that adequate supervisory assessment did not happen.The regulator also believes that Oppenheimer’s procedures and systems over penny stock transactions were not adequate and that because its AML program wasn’t focused on securities transactions it was unable to detect patterns of suspect activity linked to penny stock trades.

By agreeing to settle, Oppenheimer is not denying or admitting to the charges. It has, however, consented to the entry of findings. This is the second time Oppenheimer has purportedly violated AML obligations.

Penny Stock
According to the Securities and Exchange Commission, these are stocks that trade for under $5. Most of them are risky investments with low trading volumes. Companies trade penny tocks primarily on Pink Sheets and the OTCBB (OTC Bulletin Board). They are at risk of the types of market manipulation that are harder to conduct when the stocks are on NYSE or Nasdaq. Penny stocks are “micro-cap stocks.”

It is important that investors exercise caution when investing in penny stocks. The opportunity for big profit is countered by an even bigger possibility of large losses.

According to Investopedia, four factors that make penny stock more high risk than blue chip stocks:

Not enough information available to the public: A lot of data about micro-cap stocks don’t come from credible sources and companies found on pink sheets don’t have to file with the SEC.

Lack of minimum standards: Stocks found on pink sheets and the OTCBB don’t have to satisfy minimum standard requirements to stay on the exchange. Companies that are unable to stay on a major exchange can go to a smaller one.

Insufficient history: A lot of companies that are considered to have micro-cap stocks are either new or close to bankruptcy. Track records for projecting success will be nonexistent or poor.

Lack of liquidity: It could be hard to sell the stock and/or an investor might have to lower price to get a buyer. Low liquidity makes it easier to manipulate stock prices. The pump and dump scam of penny stock is a favorite of fraudsters.

If you feel you are the victim of Penny Stock Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

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Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund

The SEC is charging Oppenheimer Alternative Investment Management and Oppenheimer Asset Management, which are two Oppenheimer & Co. investment advisers, with misleading customers about the valuation policies and performance of a private equity fund under their management. To settle the allegations, Oppenheimer will pay over $2.8M. It has also resolved the related action that was filed by Massachusetts Attorney General Martha Coakley.

According to the SEC, from 10/09 to 6/10, the two Oppenheimer investment advisers put out marketing collaterals and quarterly reports that were misleading and claimed that Oppenheimer Global Resource Private Equity Fund I L.P.’s holdings in private equity funds had values that were determined according to the estimated values of the underlying manager. In truth, contends the regulator, Oppenheimer’s portfolio manager actually valued the largest investment of the fund, Cartesian Investors-A LLC, at a markup that was considerable to the underlying manager’s estimated value. This discrepancy made it appear as if the fund’s performance was much better, per its internal rate of return. For example, at the conclusion of the quarter ending on June 30, 2009, the markup of the investment upped the internal return rate from 3.8% to 38.3%

Among the alleged misrepresentations made by ex-OAM employees to potential investors were:

· The rise in Cartesian’s value was because of a rise in its performance, when, actually, it was because of the new valuation method implemented by the portfolio manager.

· The false claim that a third-party valuation firm had written up Cartesian’s value.

· The false claim that independent third-party auditors had audited OGR’s underlying funds when actually Cartesian had not been audited.

Also, per the SEC, the policies and procedures of OAM were not reasonably structured to make sure that valuations given to existing and prospective clients were put forth in a way that was in line with written representations made to potential clients and actual investors. The Commission says that OAM’s conduct violated sections of the Securities Act of 1933, the Investment Advisers Act of 1940, and Rules 206(4)-8 and 206(4)-7.

Regarding the settlement with the state, the penalty there is $132,421. As for the over $2.8M to the SEC, $200,000 will go to the pension fund of the city of Quincy and $150,000 will go to the pension fund of the city of Brockton. Oppenheimer is also going to modify its internal controls and valuation policies.

If you think you may have suffered losses because your financial representative made misrepresentations and omissions that influenced or decision to make an investment, contact The Resolution Law Group today. Your first securities case assessment is free.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud