More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Best Practices for Working with Senior Investors Securities examiners deal harshly with RIAs that do not fulfill their fiduciary obligations toward senior investors, as the SEC and state securities regulators view older investors as particularly vulnerable and in need of protection.
The Financial Industry Regulatory Authority announced Monday that it has fined Oppenheimer & Co. Inc. $675,000 for charging unfair prices in municipal securities transactions and for failing to have an adequate supervisory system. Oppenheimer was also ordered to pay more than $246,000 in restitution, plus interest, to customers who were charged unfair prices.
In addition, FINRA fined Oppenheimer’s head municipal securities trader, David Sirianni, $100,000, and suspended him for 60 days.
In concluding this settlement, Oppenheimer and Sirianni neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
“FINRA has no tolerance for firms or individuals who charge customers excessive markups,” said Thomas Gira, FINRA executive vice president and head of Market Regulation, in a statement. “Oppenheimer charged customers unfair prices in numerous municipal securities transactions and failed to properly supervise municipal securities transactions with its customers.”
FINRA said that it found that from July 1, 2008, through June 30, 2009, Oppenheimer, through Sirianni, priced 89 customer transactions from 5.01% to 15.57% above the firm’s contemporaneous cost. In 54 of those transactions, the markups exceeded 9.4%.
Sirianni purchased municipal securities from a broker-dealer on Oppenheimer’s behalf, held the bonds in inventory for at least overnight, and then made the bonds available for resale at an unfair price to the firm’s customers, according to FINRA. Sirianni was responsible for determining the prices paid by customers in the 89 transactions.
“Oppenheimer failed to detect the unfair prices charged. Oppenheimer’s supervisory system was deficient because supervisory personnel relied solely on a surveillance report that only captured intraday transactions to review the fairness of markups/markdowns in municipal securities transactions,” FINRA said. “From at least 2005 through June 30, 2009, if an Oppenheimer trader purchased municipal securities and held those securities in inventory for a day or longer, the subsequent sales to customers would not populate the firm’s surveillance report or be subjected to a fair pricing review.”
The firm responded in a statement: "Oppenheimer is pleased that this matter, which relates to a very limited number of municipal bond trades in 2008 and 2009, has been resolved. Oppenheimer has reviewed, and where necessary, enhanced its procedures and processes to assure that clients receive fair pricing on municipal bond transactions. Oppenheimer reviewed the transactions in question, which occurred at the height of the financial crisis, and observes that they were purchased at distressed prices in open-market transactions."
Check out 5 Big Regulatory Changes Coming in 2014 on ThinkAdvisor.