Oppenheimer & Co. has been fined $20 million by the U.S. Securities and Exchange Commission (SEC) and the Treasury Department’s Financial Department’s Financial Crimes Enforcement Network (FinCEN) for selling billions of unregistered shares of penny stock in violation of securities laws. The fine reflects that brokerage firms are expected to actively police and prohibit securities fraud.
According to regulators, Oppenheimer failed to spot or take action on suspicious transactions by offshore clients who were engaging in a fraudulent “pump and dump” scheme. Oppenheimer permitted the questionable clients to deposit and then sell the shares, and then immediately wire the sales proceeds out of the accounts. The SEC found that Oppenheimer knew or should have known that the client that deposited and traded the shares was not trading for itself, as it had represented, but on behalf of U.S.-based customers and others.
The SEC also found that Oppenheimer failed to determine that the billions of shares of stock were not registered or otherwise exempt from registration. As a result, Oppenheimer allowed billions of shares of unregistered securities to be traded through its system in violation of securities laws.
In addition, to the above, FinCEN found that Oppenheimer had failed to conduct mandatory anti-money laundering supervision. FinCEN previously fined Oppenheimer $2.8 million for similar money laundering violations.
