FINRA Penalizes Oppenheimer & Co $3.8 Million After UIT Supervisory Failures

Attorney Advising Disclaimer

FINRA ordered Oppenheimer & Co to pay $3.8 million in restitution and an $800,000 fine for failing to supervise early unit investment trust (UIT) rollovers.

In an end-of-2019 press release, FINRA wrote that Oppenheimer's deficient written supervisory procedures (WSPs) and overall supervisory system proved problematic when the firm failed to identity that its representatives recommended potentially unsuitable early rollovers.

To summarize, UITs are generally regarded as long-term investments and customers can incur sales charges and other fees upon selling a UIT position before the maturity date—even if those funds are subsequently rolled over into a new UIT.

A broker or financial adviser who improperly recommends that a customer sell a position before its maturity date, thus unsuitably treating a long-term investment as a short-term product, generally should trigger a red flag within a firm's internal review and supervisory system.

In this case, FINRA found that Oppenheimer's supervisory system failed to adequately respond to such unsuitable transactions and, thus, failed to sound and/or act on the alarm.

FINRA's report found that in failing to adequately supervise its brokers when they recommended such early rollovers, Oppenheimer may have caused customers to incur sales charges and fees in the ballpark of $3.8 million, which explains FINRA's decision to order Oppenheimer to pay $3.8 million in restitution to investors.

FINRA has sanctioned Oppenheimer & Co in the past for poor supervision. In 2018, FINRA awarded a married couple $800,000 after finding Oppenheimer negligent in recommending exceedingly risky and harmful energy stocks. In 2016, FINRA fined Oppenheimer $2.25 million and ordered $716,000 in restitution for unsuitable sales of non-traditional exchange-traded funds (leveraged, inverse, and inverse-leverage ETFs), while also ordering a $2.5 million fine and $1.25 million in restitution for failing to supervise broker Mark Christopher Hotton, who allegedly stole money from clients while excessively trading their accounts.

Click here to read more disciplinary history involving Oppenheimer & Co.

If you have invested with Oppenheimer & Co or with any firm whose failure to supervise a broker or investment adviser who unsuitably recommended products or harmful transactions produced unnecessary or excessive fees, such as early termination or sales charges incurred as a result of selling prior to maturity, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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