Brokerdealer.com blog update courtesy of InvestmentNews.

Yes, you read the title right, SEC officials are blasting the commission for turning a blind eye to fining brokerdealer firm Oppenheimer & Co. Inc. for further misconduct. As you may remember a brokerdealer.com blog from last week, Oppenheimer & Co. Inc. was fined $20 million for improper penny stock trades. The SEC said that the firm failed to prevent suspicious penny stock trading and pump-and-dump schemes. Officials are now claiming that further fines should be given to Oppenheimer due to continued misconduct. 

Two members of the Securities and Exchange Commission blasted the agency’s decision to spare Oppenheimer Holdings Inc. from additional sanctions related to a recent settlement, saying regulators were turning a “blind eye” to the investment bank’s pattern of misconduct.

SEC Commissioners Luis Aguilar and Kara Stein, both Democrats, said they opposed a waiver of a penalty that would have barred Oppenheimer from raising money for private firms and hedge funds after the company admitted last week to improperly selling billions of shares of penny stocks.

“These violations are just the most recent chapter in a long and unfortunate history of regulatory failures, some more significant than others, but cumulatively indicative of a wholly failed compliance culture,” Mr. Aguilar and Ms. Stein wrote in a statement released Wednesday.

Their dissent is the latest example of partisan disputes at the five-member SEC over how the agency polices Wall Street. The fight over waivers stalled an earlier settlement with Bank of America Corp. and portends future difficulties for companies seeking to end enforcement cases, especially if they are repeat offenders.

Ms. Stein previously criticized a penalty waiver that benefited Royal Bank of Scotland Group Plc and fought to attach more onerous conditions to a reprieve that Bank of America obtained after settling a $16.7 billion mortgage-bond case. SEC Chair Mary Jo White, an independent, and Commissioners Daniel Gallagher and Michael Piwowar, both Republicans, voted in favor of the waiver for Oppenheimer.

The SEC has typically granted waivers to keep from punishing parts of financial companies that weren’t implicated in the wrongdoing at issue.

Oppenheimer spokesman Stefan Prelog said the firm will hire “a fully independent law firm” to review its compliance procedures. The findings and recommendations will be reported to the company’s independent directors, he said.

‘LACKS TEETH’

Mr. Aguilar and Ms. Stein said the SEC’s action “lacks teeth” because it leaves the door open to Oppenheimer hiring a law firm it already uses, which “has every incentive to be accommodating by ignoring or dismissing inadequacies in the firm’s practices.”

Oppenheimer admitted Jan. 27 that it failed to report red flags that its client Gibraltar Global Securities, a Bahamas-based firm, was selling penny-stock shares without being registered in the U.S. The firm acknowledged additional sales of penny stocks for a different customer that resulted in about $588,400 in commissions, according to the SEC. Oppenheimer agreed to pay $20 million to settle the case.

“The company is dedicated to putting these issues behind it through the adoption of a strong compliance infrastructure,” Mr. Prelog said in the statement.

U.S. representative Maxine Waters, a California Democrat, agreed with Mr. Aguilar and Ms. Stein.

“Investors and the American public are greatly disserved when our regulators throw away valuable enforcement tools and adopt a policy of ‘too-big to bar,’” Ms. Waters said in a statement, adding that said she will work with other Democratic lawmakers on legislation that “sends a strong message to the markets that wrongdoers like Oppenheimer will be sufficiently held accountable for their misdeeds.”

Oppenheimer has settled at least 30 separate cases with regulators since 2005, according to Mr. Aguilar and Ms. Stein’s statement. In 2010, the firm agreed to pay $31 million to investors to settle the New York Attorney General’s claims it misrepresented the safety of auction-rate securities. The firm agreed in 2013 to pay $675,000 to the Financial Industry Regulatory Authority Inc. to settle claims that it charged unfair prices to customers buying municipal securities.

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Oppenheimer fined for failure to report suspicious penny stocks

Brokerdealer.com blog update is courtesy of Mason Braswell from InvestmentNews

Brokerdealer firm, Oppenheimer & Co. Inc., has reach a deal with the SEC and FinCEN resulting in the firm paying $20 million, pleading guilty, and hiring an independent consultant over improper penny stock trades. The SEC and FinCEN said,  firm failed to prevent suspicious penny stock trading and pump-and-dump schemes.

The firm, which runs a retail brokerage operation with around 1,400 financial advisers, failed to properly detect and report suspicious trades in penny stocks, which are thinly traded securities that can be vulnerable to manipulation by stock promoters, according to FinCEN. The regulator identified at least 16 customers in five states who engaged in “patterns of suspicious activity.”

“Broker–dealers face the same money laundering risks as other types of financial institutions,” said FinCEN Director Jennifer Shasky Calvery, in a release. “And by failing to comply with their regulatory responsibilities, our financial system became vulnerable to criminal abuse. This is the second time FinCEN has penalized Oppenheimer for similar violations. It is clear that their compliance culture must change.”

In a parallel action, the SEC pointed to two instances between 2008 and 2010 in which the firm engaged in unregistered sales of penny stocks.

In one case, a financial adviser and his branch manager willfully engaged in unregistered sales of 2.5 billion shares of penny stocks on behalf of a customer, despite the fact that the shares were not exempt from registration, according to the SEC settlement. The trades generated $12 million in proceeds, of which Oppenheimer was paid $588,400 in commissions.

The settlement did not name the broker or branch manager, but said that its investigations into the matter were ongoing.

The other charge revolves around Oppenheimer’s role in possibly assisting allegedly illegal activity by a Bahamas-based brokerage firm, Gibralter Global Securities.

The firm disclosed in quarterly filings earlier this year.

that it was setting aside $12 million to deal with the possible fallout from regulatory investigations, mostly dealing with penny stock issues.

The head of the firm’s retail brokerage, Robert Okin, resigned in December, reportedly to pursue other interests. His Finra BrokerCheck record discloses he is facing an SEC investigation.

A spokesman for Oppenheimer, Stefan Prelog said in an email that the firm was “pleased to put these matters, which involve activity that occurred years ago, behind it.”

The firm has also agreed to hire an independent consultant as part of the settlement.

The post Oppenheimer’s Penny Stocks Results in $20M Fine  appeared first on BrokerDealer Blog.

BOSTON, Aug. 27, 2014 /PRNewswire/ — Rhythm, a biopharmaceutical company developing peptide therapeutics that address gastrointestinal diseases and genetic deficiencies that result in metabolic disorders, announced today that it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (SEC) relating to the proposed initial public offering of shares of its common stock. The number of shares to be offered and the price range for the offering have not yet been determined.

Citigroup and Cowen and Company will act as joint book-running managers for the offering. Canaccord Genuity Inc., Oppenheimer & Co., and Cantor Fitzgerald & Co. will act as co-managers. The offering will be made only by means of a prospectus. When available, copies of the preliminary prospectus relating to the offering may be obtained from Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by email atprospectus@citi.com, or by calling (800) 831-9146, and from Cowen and Company, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by calling (631) 274-2806, or by fax at (631) 254-7140.

A registration statement relating to these securities has been filed with the SEC, but has not yet become effective. These securities may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the securities laws of any such state or jurisdiction.

Rhythm is a biopharmaceutical company developing peptide therapeutics that address unmet needs in gastrointestinal diseases and genetic deficiencies that result in metabolic disorders. Rhythm is developing the ghrelin peptide agonist, relamorelin (RM-131), for the treatment of diabetic gastroparesis and other gastrointestinal functional disorders; and the MC4R peptide agonist, RM-493, for obesity caused by genetic deficiencies in the MC4 pathway. The company is based in Boston, Massachusetts.

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