WASHINGTON – Oppenheimer & Co. is paying $20 million in civil settlements with U.S. regulators who accused the investment firm of improper sales of penny stocks and inadequate controls against money laundering.
The investment firm agreed to pay $10 million and is admitting wrongdoing in its settlement with the Securities and Exchange Commission announced Tuesday. Oppenheimer also is paying $10 million in a settlement with the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN.
The SEC said Oppenheimer sold billions of shares of penny stocks in unregistered offerings on behalf of customers, ignoring red flags and aiding the customers’ illegal activity. Oppenheimer admitted in its agreement with FinCEN that it failed to maintain an adequate program to prevent money laundering.
New York-based Oppenheimer said it was pleased to resolve the matter. “The ability to finalize matters involving two regulatory agencies in a co-ordinated manner was helpful in bringing this matter to a conclusion,” the firm said in a statement.
An admission of wrongdoing in an SEC settlement by a company or individual is fairly rare and is deemed to indicate serious harm to investors. Oppenheimer also agreed to refrain from future violations of the securities laws and to be censured, bringing the possibility of a stiffer sanction if the violation is repeated. In addition, Oppenheimer agreed to take measures such as hiring an independent consultant to review its procedures over a five-year period.
The sanctions imposed on the firm “reflect the magnitude of Oppenheimer’s regulatory failures,” SEC Enforcement Director Andrew Ceresney said in a statement.
FinCen and the New York Stock Exchange fined Oppenheimer $2.8 million in 2005 for similar violations: inadequate policies and procedures, reporting of suspicious transactions and customer vetting to prevent money laundering. The Financial Industry Regulatory Authority, the securities industry’s policing body, fined Oppenheimer $1.4 million in 2013 for violations of securities laws and anti-money laundering failures.
FinCen said Tuesday it had identified 16 Oppenheimer customers that engaged in suspicious trading through branch offices in five states from 2008 through May 2014. The agency said all the suspicious activity involved penny stocks, which are cheap, risky and thinly traded securities that can be vulnerable to manipulation by stock promoters and trading fraud schemes. FinCen said Oppenheimer failed to report to regulators patterns of activity in which customers deposited large blocks of unregistered penny stocks and made transactions in them.
The firm is a subsidiary of Oppenheimer Holdings Inc.