The Investor’s Watchdog

The Investor's Watchdog

New York City Oppenheimer & Co. Broker-Dealer Consents to Fines and Restitution to Resolve Allegations of Failing to Supervise Early Rollovers and Series-to-Series Early Rollovers of UITs

Tuesday, January 21, 2020

On December 17, 2019, Oppenheimer & Co. Inc., a full-service broker-dealer headquartered in New York City with approximately 127 branch offices and 1,955 registered representatives, recently consented to sanctions imposed by the Financial Industry Regulatory Authority (FINRA) Department of Enforcement to resolve allegations of securities industry violations.

According to the Letter of Acceptance, Waiver and Consent (AWC), Oppenheimer failed to establish and maintain a supervisory system and written supervisory procedures (WSPs) that were reasonably designed to detect unsuitable recommendations made by representatives to customers as they pertain to early rollovers of Unit Investment Trusts (UITs). From January 2011 through December 2015, Oppenheimer failed to supervise patterns of short-term trading of UITs, causing customers to incur greater sales charges than holding the UIT to the maturity date, which is often 15 or 24 months after the initial public offering. According to the AWC, Oppenheimer executed over $6.4 billion in UIT transactions, including more than $753.9 million in proceeds from transactions in which the UITs were sold more than 100 days before their maturity dates and in which some were used as “early rollovers” to purchase new UITs. Another $237.1 million of this total were for transactions in which customers sold UITs at least 100 days before the maturity date and use some or all of the proceeds to purchase a subsequent series of the same UITs (known as “series-to-series early rollovers”). These sales generated more than $68.6 million in sales charges.

Although Oppenheimer’s WSPs recognized UITs as “long-term investments and usually have sales charges incorporated in them based upon this intention” and cautioned frequent trading or switching, the WSPs did not discuss early rollovers, series-to-series rollovers, or any other potentially unsuitable pattern of early UIT rollovers. Additionally, Oppenheimer relied on branch managers to manually review trade reports for unsuitable trading patterns. However, since these reports did not effectively flag early rollovers, the branch managers could not effectively identify representatives who recommended potentially unsuitable UIT trades which caused customers to incur $3,874,206.90 in sales charges they would not have incurred had they held the UITs to their maturity dates.

Based on the foregoing, Oppenheimer violated NASD Rule 3010 and FINRA Rules 3110 and 2010. To resolve these allegations, Oppenheimer consented to the imposition of a censure, $800,000 fine and restitution to numerous customers totaling $3,874,206.90, plus interest.

If you lost money due to broker misconduct, call our team at 1-877-410-8172 for a no-obligation consultation to discuss your recovery options.


Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

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