FINRA Fines Oppenheimer $3.75 Million for Failing to Supervise its Brokers

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A Financial Industry Regulatory Authority (FINRA) investigation of Oppenheimer & Co. discovered that the investment firm failed to timely submit more than 300 required filings to FINRA regarding its brokers. Consequently, the investing public and other broker-dealers were not afforded proper notice of severe charges made against Oppenheimer’s registered representatives.

In connection with its findings, FINRA fined Oppenheimer $3.75 million, $1.25 million of which related to the firms failure to supervise Mark Hotton, a former Oppenheimer broker who excessively traded and stole money from his clients’ brokerage accounts.

FINRA learned that Oppenheimer failed to properly vet Hotton prior to hiring him as FINRA records indicated that he was subject to 12 reportable events, including criminal charges and defrauding his business partners out of several million dollars.  Even though Oppenheimer surveillance analysts noticed that Hotton had been excessively trading customer accounts and transferred more than $2.9 million of customer funds to entities he owned or controlled, the firm failed to address those “red flags.”

FINRA permanently barred Mark Hotton from the securities industry in August 2013.

Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, said, “As this case demonstrates, the combination of an unscrupulous broker and a lax supervisory structure can cause severe customer harm. Firms must ensure that they implement supervisory systems that are reasonably designed to both identify and respond to red flags that may indicate broker misconduct.”

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Andrei Rado, Esq.
Milberg LLP
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New York, NY 10119-0165
Phone number: (800) 320-5081

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