Oppenheimer’s Penny Stocks Results in $20M Fine 


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.


FINRA Bans Penny-Stock Broker Anastasios Belesis

Brokerdealer.com update courtesy of Bloomberg’s Zeke Faux.

Financial Industry Regulatory Authority (FINRA) has been banned from the brokerage industry forever on Friday.

Anastasios Belesis

Anastasios Belesis

, the former head of John Thomas Financial Inc., was barred from the brokerage industry for life by the Financial Industry Regulatory Authority for trading ahead of clients’ orders.

Belesis dumped the New York-based firm’s position in a penny stock that was surging while 14 customers tried and failed to sell their shares, Finra said today in a statement. The industry-funded regulator ordered Belesis to pay about $1 million plus interest to customers and fined him $100,000.

Belesis has appeared on business television and had a minor role in the movie “Wall Street: Money Never Sleeps” before his boiler room across from the New York Stock Exchange closed in 2013. Trainees at the brokerage were forced to stand and bark memorized sales scripts for as long as 14 hours a day, Bloomberg News reported at the time, citing interviews with 20 former employees.

Finra said in the statement today that John Thomas didn’t hold the customer orders intentionally. Ron Cantalupo, a John Thomas broker who was accused of intimidating a colleague, was cleared by the regulator, which also dismissed charges against Michele Misiti and John Ward.

Finra’s fraud charges against Belesis were dismissed as well. He agreed to pay $500,000 in 2013 to settle accusations by the Securities and Exchange Commission that he pressured a hedge-fund manager to steer fees to John Thomas.

“He was never ever charged with running a boiler room,” Ira Sorkin, Belesis’s lawyer at Lowenstein Sandler LLP, said in a telephone interview. “To the extent there were charges brought against him for fraud, they were dismissed.”

For the original article from Bloomberg’s Zeke Faux, click here