(Bloomberg) — Oppenheimer Holdings Inc. will pay $20 million to settle U.S. regulatory claims that it improperly sold billions of shares of penny stocks on behalf of customers.
Oppenheimer admitted that it failed to report red flags that its client Gibraltar Global Securities, a Bahamas-based firm, was carrying out the transactions without being registered in the U.S., the Securities and Exchange Commission said in a statement. The firm acknowledged additional sales of penny stocks for a different customer that resulted in about $588,400 in commissions, according to the SEC.
The case marks the SECs latest move to tighten its oversight of gatekeepers such as brokers, accountants and lawyers, who are required to perform basic checks of customers and report signs of potential misconduct. The SEC extracted settlements from Wedbush Securities Inc. and E*TRADE Financial Corp. in recent months for failing to properly vet client trades.
Oppenheimer completely failed to fulfill its gatekeeper role here in connection with two different situations, Andrew Ceresney, director of the SECs enforcement division, said in a call with reporters.
In a statement, Oppenheimer said it was pleased to resolve the claims, which involve activity from years ago.
Repeat Offender
The SEC in April 2013 sued Gibraltar, saying the firm had been operating illegally in the U.S. since 2008. Gibraltar is fighting the claims in federal court in Manhattan.
The settlements made public today call for Oppenheimer to pay $10 million to settle the SEC case and another $10 million to resolve related violations with the Treasury Department.
Jennifer Shasky Calvery, director of the Treasurys Financial Crimes Enforcement Network, said Oppenheimer faced stiffer penalties because it was a repeat offender. Oppenheimer paid $2.8 million in 2005 over anti-money laundering violations.
Oppenheimers compliance structure created unnecessary information silos that contributed to Oppenheimers failures to sufficiently detect and report suspicious activity, Shasky Calvery told reporters on a conference call.
The SEC said its investigation is continuing.
