FINRA fined Oppenheimer & Co. Inc. $2.25 million and ordered the firm to pay over $716,000 to harmed clients for selling leveraged, inverse and inverse-leveraged exchange-traded funds without reasonable supervision as well as for soliciting unsuitable non-traditional ETFs.

Over 30,000 non-traditional ETF transactions, totaling about $1.7 billion for customers, were processed by Oppenheimer representatives from August 2009 through September 2013, according to FINRA.

Only two months prior to this activity FINRA advised broker-dealers of the risks and natural complexities of particular non-traditional ETFs through it Regulatory Notice 09-31. Subsequently, the firm instituted policies in August 2009 to stop its representatives from soliciting non-traditional ETFs to retail customers. The firm also prohibited representatives from buying ETFs unless the client matched particular criteria, including having over $500,000 in liquid assets.

Even still, representatives continued to solicit retail customers to purchase non-traditional ETFs and to execute unsolicited non-traditional ETF transactions even though the customers did not meet the criteria.

“Written procedures are worthless unless accompanied by a program to enforce them,” Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, stated.

“While Oppenheimer’s procedures prohibited solicitation of non-traditional ETFs, the absence of any meaningful compliance effort resulted in its representatives continuing to solicit unsuitable non-traditional ETF purchases, including a number involving elderly investors,” he said.

 

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