The Securities and Exchange Commission (SEC)charged investment management company OppenheimerFunds, Inc. for grossly misleading investors in regards to the policies and practices of two of its funds, the high-yield Oppenheimer Champion Income Fund and the intermediate-term Oppenheimer Core Bond Fund. This charge has led to SEC sanctions of upwards of $35 million.
The SEC found that in 2008, both fixed income retail mutual funds suffered losses significantly greater than similar industry funds—Champion Income Fund's share price fell by 80% compared to an industry average decline of just 26%. Meanwhile, Core Bond Fund's share price fell by 36%, a rate nine times greater than its peers' average decline of just 4%. The SEC determined OppenheimerFunds' significant losses were due to exposure to commercial mortgage-backed securities (CMBS) and the utilization of derivative instruments known as total return swaps or TRS contracts, which created substantial leverage.
Furthermore, the SEC discovered that Oppenheimer sold shares of their funds under a false prospectus that claimed cash investments in junk bonds while failing to adequately disclose this dependence on substantial leveraged TRS contracts.
Oppenheimer was also found to have repeatedly made misleading statements to investors, falsely claiming their funds had only suffered paper losses, which Oppenheimer claimed could be reversed when credit markets returned to normal, even though the company had knowledge that such recovery prospects were poor.
If you suspect a broker or firm has engaged in unsuitable, improper, fraudulent or misleading practices that have proven harmful to your investments or interests, call The Law Offices of Jonathan W. Evans & Associates at 818-760-9880 for an investigation and consultation.