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FINRA fines Oppenheimer for overcharging customers

BBR Staff Writer Published 10 December 2013

The US Financial Industry Regulatory Authority (FINRA) has imposed a monetary penalty of $675,000 against investment boutique firm Oppenheimer & Co, for overcharging investors in municipal securities transactions and for failing to implement an adequate supervisory system.

FINRA, an independent body that oversees brokerage firms, ordered Oppenheimer to reimburse more than $246,000 in restitution, and interest, to customers who were charged unfair prices.

Apart from this, the regulatory agency fined Oppenheimer's head municipal securities trader, David Sirianni, $100,000, and suspended him for 60 days.

FINRA executive vice president and market regulation head Thomas Gira said, "FINRA has no tolerance for firms or individuals who charge customers excessive markups.

"Oppenheimer charged customers unfair prices in numerous municipal securities transactions and failed to properly supervise municipal securities transactions with its customers."

During investigation, the US market watchdog found that Oppenheimer, through Sirianni, priced 89 customer transactions from 5.01% to 15.57% above the firm's contemporaneous cost, from 1 July 2008 to 30 June 2009.

Furthermore, Sirianni purchased municipal securities from a broker-dealer on Oppenheimer's behalf, and sold the bonds at an unfair price to the firm's customers and executed 89 overpriced transactions.

Oppenheimer's supervisory system failed to detect the unfair prices charged, and it was inadequate, as its supervisory personnel were completely dependent on a surveillance report that only captured intra-day transactions to check the fairness of markups/markdowns in municipal securities transactions.

Oppenheimer and Sirianni neither admitted nor denied the charges, although, both agreed to the entry of FINRA's findings.