The Financial Industry Regulatory Authority (FINRA) said Wednesday that it has fined Oppenheimer & Co. Inc. $2.25 million and ordered the firm to pay restitution of more than $716,000 to affected customers for selling leveraged, inverse and inverse-leveraged exchange traded funds (ETFs) to retail customers without reasonable supervision, and for recommending these non-traditional ETFs that were not suitable.
Oppenheimer failed to enforce the policies, its reps continued to solicit retail customers to purchase non-traditional ETFs and continued to execute unsolicited non-traditional ETF transactions even though the customers did not meet Oppenheimer’s stated criteria, FINRA states.
From August 2009 through September 2013, more than 760 Oppenheimer representatives executed more than 30,000 non-traditional ETF transactions totaling approximately $1.7 billion for customers.
FINRA found that Oppenheimer did not establish an adequate supervisory system to monitor the holding periods for non-traditional ETFs. And that the firm “failed to employ any surveillance or exception reports to effectively monitor the holding periods for non-traditional ETFs, so certain retail customers held non-traditional ETFs in their accounts for weeks, months and sometimes years, resulting in substantial losses.”
FINRA also found that Oppenheimer failed to conduct adequate due diligence regarding the risks and features of non-traditional ETFs and, as a result, did not have a reasonable basis to recommend these ETFs to retail customers. Similarly, Oppenheimer reps solicited and effected non-traditional ETF purchases that were unsuitable for specific customers. For example:
- An 89-year conservative customer with annual income of $50,000 held 96 solicited non-traditional ETF positions for an average of 32 days (and for up to 470 days), resulting in a net loss of $51,847.
- A 91-year conservative customer with an annual income of $30,000 held 56 solicited non-traditional ETF positions for an average of 48 days (and for up to 706 days), resulting in a net loss of $11,161.
- A 67-year conservative customer with an annual income of $40,000 held two solicited non-traditional ETF positions in her account for 729 days, resulting in a net loss of $2,746.
If you or someone you know lost money investing in leveraged exchange traded funds, ETFs, or with Oppenheimer, you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or firstname.lastname@example.org for a free and confidential case evaluation.