From USA Today
Broker-dealer Oppenheimer & Co. has been fined $2.25 million for selling non-traditional exchange-traded funds to retail customers without reasonable supervision and for recommending the investments to clients for whom they were unsuitable, Wall Street’s self-regulator said Wednesday.
New York-based Oppenheimer was also ordered to pay $716,000 in restitution to customers who lost money on the investments, the Financial Industry Regulatory Authority said.
Since 2009, Oppenheimer had rules that barred its representatives from soliciting retail customers to buy the investments, which include leveraged, inverse and inverse-leveraged exchange-traded funds, FINRA said. The company rules also barred representatives from executing unsolicited purchases of the funds for retail investors unless the customers had more than $500,000 in liquid assets.
However, Oppenheimer representatives continued to solicit retail customers for the investments and also executed unsolicited transactions for customers who did not meet the asset requirement, FINRA said.
Non-traditional exchange-traded funds are designed to return a multiple of an underlying financial index or benchmark, the inverse of that benchmark, or both, over the course of one trading session, usually a single day, according to a settlement Oppenheimer reached with FINRA.
As a result, the longer-term performance of the investments can differ significantly from their underlying index or benchmark. For that reason, the investments may not be suitable for retail customers.
FINRA said Oppenheimer representatives executed more than 30,000 non-traditional exchange-traded fund transactions totaling roughly $1.7 billion for customers from August 2009 through Sept. 20, 2013. According to the regulator, some conservative investment clients lost money:
