FINRA sanctioned brokerage firm Oppenheimer & Co. Inc. a total of $3.75 million—which includes a $2.5m fine and $1.25m in restitution—for failing to supervise former broker Mark Christopher Hotton. FINRA previously barred Hotton for stealing money from and excessively trading in customer brokerage accounts.
According to FINRA Executive Vice President and Chief of Enforcement Brad Bennett, Oppenheimer's "lax supervisory structure" helped cause the firm to miss numerous red flags that may have indicated broker misconduct on Hotton's part.
For instance, Oppenheimer purportedly failed to adequately investigate Hotton prior to hiring him. FINRA records show that Hotton had already racked up at least 12 disclosures and other reportable events prior to being hired by Oppenheimer, including criminal charges, an "employment separation after allegations" event and seven customer complaints. Hotton's present-day BrokerCheck report reveals 30 disclosure events.
Oppenheimer also purportedly failed to place Hotton under heightened supervision upon learning that then-newly hired Hotton was a named defendant in a civil action alleging that Hotton had defrauded prior business partners out of several millions of dollars.
Investigators found that further red flags indicated Hotton's fraudulent activity had crossed over into his time at Oppenheimer, including several suspicious wire transfer requests and other actions that allowed Hotton to transfer over $2.9 million from customer accounts without adequate supervision or surveillance that, according to FINRA, would have suggested that Hotton was trading at "excessive levels."
Finally, FINRA found that Oppenheimer failed to make over 300 required filings in a timely manner, noting that the firm made its filings, on average, 238 days late, thus subjecting the investing public and other broker-dealers to added risk by allowing disclosures to pass under the radar for several months before alerting regulators.
If you have invested with Oppenheimer & Co., former broker Mark Hotton or with any other FINRA member firm whose failure to adequately supervise a broker's conduct, such as excessive trading or wire transfer requests, has proven harmful to your investment or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.
News Release: FINRA Sanctions Oppenheimer & Co. $3.75 Million for Supervisory Failures (FINRA)