The
Financial Industry Regulatory Authority (FINRA) continues a trend by securities
regulators imposing affirmative duties on brokerage firms to detect certain
illegal activities in their clients’ accounts.
FINRA’s latest action targets Oppenheimer & Co., Inc., for allowing
nearly $1.5 million in unregistered penny stocks to be sold in customer
accounts. This is the second time
Oppenheimer has been found to have violated its Anti-Money Laundering (AML)
obligations.
According
to FINRA’s findings, between August 2008 and September 2010, several customers
deposited large amounts of penny stocks shortly after opening Oppenheimer
accounts, liquidated the holdings and then transferred the proceeds out of the
accounts. The penny stocks, which are
low-priced, speculative securities, were not registered or otherwise exempt
from registration. During this time
period, Oppenheimer sold more than one billion shares of the penny stocks. FINRA determined that the sales occurred due
to failures of the Oppenheimer AML program to focus on securities transactions
and its failure to monitor patterns of suspicious activity associated with
penny stock trades. Among other
problems, FINRA found that the firm’s procedures were inadequate and unable to
determine whether stocks being sold were restricted or freely tradable.
