Reuters: Regulatory News: UPDATE 1-FINRA fines Oppenheimer $1.4 mln over penny stocks, internal controls

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UPDATE 1-FINRA fines Oppenheimer $1.4 mln over penny stocks, internal controls Aug 5th 2013, 16:57 Mon Aug 5, 2013 12:57pm EDT By Trevor Hunnicutt NEW YORK Aug 5 (Reuters) - Oppenheimer & Co has agreed to pay $1.425 million in fines to resolve charges that the financial services company sold unregistered penny stocks and had inadequate safeguards against money laundering, Wall Street's industry-funded watchdog said. Seven Oppenheimer brokers in the U.S. sold more than 1 billion shares of 20 unregistered penny stocks, and the company failed to supervise activity in its customers' accounts, the Financial Industry Regulatory Authority (FINRA) said on Monday. "If Oppenheimer had an adequate [anti-money laundering] and supervisory program in place, it would have made further inquiry into the penny stock sales," said Brad Bennett, FINRA's enforcement chief, in a statement. In consenting to the fine, Oppenheimer neither admitted nor denied FINRA's charges. The full-service broker-dealer, a subsidiary of Oppenheimer Holdings Inc, employs about 2,450 registered financial professionals in 115 branch offices. In a statement, Oppenheimer said it was "happy" to resolve the charges. "The sales of penny stocks at issue in the settlement with FINRA occurred a number of years ago and were mostly conducted by brokers no longer associated with our firm," said Brian Maddox, a spokesman for Oppenheimer. "The firm has significantly tightened its policies relating to the sales of low priced shares and enhanced its review of client sales with respect to [anti-money laundering] oversight." Penny stocks often trade at relatively low prices and market capitalizations, usually outside major exchanges and are generally considered to be higher risk. Several of Oppenheimer's customers had close ties to the companies whose stocks they held, according to FINRA. FINRA's complaint described an instance when one of Oppenheimer's customers in Boca Raton, Florida owned nearly 40 percent of the outstanding shares in a tiny company. The over-the-counter or Pink Sheets company, which is called Bio-Clean International and sells environmentally safe cleaning products according to its website, is not registered with the Securities and Exchange Commission. Senior Oppenheimer compliance employees learned about the customer's large ownership stake and restricted his ability to purchase and receive the stock. But Oppenheimer's compliance director allowed the customer to continue selling stock already in his accounts, according to FINRA. Attempts to reach Bio-Clean through the contact information listed on their website were not immediately successful. Oppenheimer was fined $2.8 million in 2005 for failing to establish and implement policies to detect and report transactions connected with the Bank Secrecy Act. New Hampshire also sanctioned the company last year for selling unregistered securities. Shares of Oppenheimer fell 2.6% percent to $18.70 in morning trading. Link this Share this Digg this Email Reprints

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