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FINRA Announces Settlement with Oppenheimer Over Unregistered Penny Stocks

The Financial Industry Regulatory Authority (“FINRA”) has fined Oppenheimer & Co. Inc. $1,425,000 for failing to have an adequate anti-money laundering (“AML”) compliance program and for selling more than a billion shares of unregistered penny stocks. Oppenheimer agreed to the sanctions in settlement of allegations first made by FINRA in its May 2013 complaint.

According to FINRA, between August 2008 and September 2010, several Oppenheimer branch offices sold more than one billion shares of penny stocks that were neither registered nor exempt from registration. FINRA claims the sales presented red flags that should have been identified by Oppenheimer. Specifically, the customers deposited huge blocks of penny stocks immediately after opening the accounts, quickly liquidated the stocks, and then transferred the sale proceeds out of the accounts. FINRA asserted that Oppenheimer should have determined whether the penny stocks were registered.

FINRA found that Oppenheimer’s supervisory procedures governing penny stock transactions and its AML program were inadequate. FINRA claimed that if Oppenheimer had supervised the transactions and accounts properly, the suspicious activity would have been detected, and the sales of unregistered penny stocks would not have taken place.

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