FINRA hit Oppenheimer & Co. with a $2.5 million fine, as well as $1.25 million in restitution, for its failures regarding former broker Mark Hotton, who was barred from the industry in 2013.
Among other recent enforcement actions, the agency censured and fined Ameriprise Financial in Minneapolis and suspended a rep for changing customer contact notes after the customer lodged a complaint. It also censured and fined two other firms on supervisory failures, one for a broad range of issues and the other related to the sales of nontraditional ETFs.
Oppenheimer & Co. to Pay Nearly $4 Million for Failure to Rein In Broker
FINRA has fined Oppenheimer & Co. Inc. $2.5 million, as well as ordering the firm to pay restitution to clients of $1.25 million, after it failed to supervise Mark Hotton, a former Oppenheimer broker who stole money from his customers and excessively traded their brokerage accounts. FINRA permanently barred Mark Hotton from the securities industry in August 2013.
What Your Peers Are Reading
It’s not the first time that Oppenheimer has been in the hot seat. At the end of January the firm was fined $20 million for penny stock and anti-money laundering violations, although the SEC cut it some slack on those charges, waiving sanctions over protests from some of its own commissioners as well as Rep. Maxine Waters, D-Calif. All told, Oppenheimer has been the target of at least 30 regulatory actions since 2005.
But Hotton has sunk them in all kinds of hot water. Oppenheimer has already paid more than $6 million to resolve customer arbitration claims related to its supervision of Hotton. FINRA ordered this latest $1.25 million in restitution to 22 additional customers who suffered losses but had not filed arbitration claims.
This time, the firm has been taken to task over its failure to keep tabs on Hotton — even before it hired him. The former broker was subject to 12 reportable events, including criminal charges and seven customer complaints. The firm also failed to increase supervision of Hotton despite learning, shortly after he joined the firm, that his business partners had sued him for defrauding them out of several million dollars.
Additionally, FINRA says, Oppenheimer failed to respond to “red flags” in correspondence and wire transfer requests demonstrating that Hotton was wiring funds from Oppenheimer customer accounts to entities that he owned or controlled. This allowed Hotton to transfer more than $2.9 million from those customers’ accounts. Finally, Oppenheimer failed to adequately supervise Hotton’s trading of his customers’ accounts despite the fact Oppenheimer’s surveillance analysts detected Hotton was trading the accounts at presumptively excessive levels.
In addition to the issues surrounding Hotton, FINRA also found that Oppenheimer failed to make more than 300 required filings to FINRA about some of its brokers in a timely manner. On average, these filings were 238 days late; and thus, the investing public and other broker-dealers were not timely made aware of serious allegations made against Oppenheimer’s registered representatives, including Hotton. Also, during the course of FINRA’s investigation, Oppenheimer repeatedly failed to provide timely responses to FINRA requests for information and documents.
Oppenheimer has settled the matter without admitting or denying the charges, although it did consent to the entry of FINRA’s findings.
Ameriprise Rep Hid Customer Complaint
Ameriprise Financial Services Inc. in Minneapolis was censured and fined $100,000 by FINRA, and David Bradley Tysk was fined $50,000 and suspended for three months, after the agency found that Tysk altered computer notes of customer contacts after the customer complained about the suitability of a recommendation.
Not only did Tysk ignore document-retention policies by altering his notes, he hid the alterations instead of notifying the firm when he provided a copy of the notes to be produced in discovery during an arbitration proceeding. The customer was suspicious of the notes and requested further discovery to determine whether the notes had been altered after he lodged his complaint with the firm. The firm and Tysk opposed the requests.