The Real DTCC Discussion

[sludgehound]

Oppenheimer SEC today

3:58p ET

Oppenheimer & Co. agreed to pay a combined $20 million in settlements over allegations of misconduct in the brokerage's handling of penny-stock trades and ignoring red flags signaling potential violations, as part of a broader government effort to improve compliance with U.S. regulations.
The Securities and Exchange Commission said on Tuesday that Oppenheimer agreed to admit wrongdoing and pay $10 million to settle SEC's charges and an additional $10 million to settle a parallel case with the Treasury Department .
"Despite red flags suggesting that Oppenheimer's customer's stock sales were not exempt from registration, Oppenheimer nonetheless allowed unregistered sales to occur through its account, failing in its gatekeeper role," said Andrew J. Ceresney , director of the SEC's enforcement division.
For its part, Oppenheimer said it was "pleased to put these matters, which involve activity that occurred years ago, behind it. The ability to finalize matters involving two regulatory agencies in a coordinated manner was helpful in bringing this matter to a conclusion."
According to the SEC , Oppenheimer executed billions of shares of penny-stocks for a proprietary account of a customer, Bahamas -based Gibraltar Global Securities , which wasn't registered to do business in the U.S.
The agency said Oppenheimer apparently knew or was negligent in not knowing that Gibraltar was executing transactions and providing brokerage services for its underlying customers, including many in the U.S.
Gibraltar couldn't be reached for comment on Tuesday.
The SEC also found that Oppenheimer failed to report to report potential misconduct by Gibraltar and its customers, and that Oppenheimer failed to properly report, withhold and remit more than $3 million in backup withholding taxes from sales proceeds in Gibraltar's account.
The SEC said it is continuing its investigation into allegations Oppenheimer engaged in unregistered sales of penny stocks on behalf of another customer, which the SEC didn't identify. The SEC said that investigation found the sales generated approximately $12 million in profit, of which Oppenheimer was paid $588,400 in commissions. In that case, Oppenheimer again is accused of failing to respond to red flags and conduct a search into whether sales were exempt from registration requirements.
The SEC said it separately had charged Gibraltar with misconduct in 2013.
Write to Tess Stynes at [e-mail]
Corrections & Amplifications
An earlier version of this article incorrectly said the firm executed billions of dollars in penny-stock trades.
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