FINRA Fines Oppenheimer & Co., Inc. $3.75 Million for Failing to Supervise Broker

The Financial Industry Regulatory Authority (FINRAannounced on March 26, 2015 that it fined Oppenheimer & Co., Inc. for failing to supervise Mark Hotton, a former broker who allegedly stole money from his clients accounts and excessively traded their accounts.  FINRA had already barred Mr. Hotton from the securities industry in 2013.

According to FINRA’s announcement, Oppenheimer & Co., Inc. failed to supervise Mr. Hotton in many respects, including during his hire and during his employment, as well as failed to supervise the accounts he was trading.  Oppenheimer & Co., Inc. failed to supervise Mr. Hotton during his hire by failing to consider 12 prior reportable events that occurred in Mr. Hotton’s past, including criminal events and seven customer complaints, according to FINRA.

FINRA also announced that Oppenheimer & Co., Inc. failed to supervise Mr. Hotton during his employment by failing to subject him to heightened supervision despite learning that his business partners had allegedly sued him for fraud resulting in several million dollars’ damages.  Oppenheimer & Co., Inc. may have been required to subject Mr. Hotton to heightened supervision, a more expensive and time-consuming manner of supervision, because of the number of past customer complaints against him while employed at other firms or while at Oppenheimer & Co., Inc.  To may matters worse, FINRA noted that Oppenheimer & Co., Inc. further failed to supervise Mr. Hotton by failing to investigate “red flags” in correspondences and wire requests that could have signaled potential violations of securities laws and industry rules.  FINRA alleged that Mr. Hotton was wiring funds out of customers’ accounts to accounts he owned or controlled.

FINRA also announced that Mr. Hotton excessively traded certain of his clients’ accounts.  Excessive trading may occur when purchases and sales of securities are made at such a rapid rate that the purpose is only to increase the broker’s commissions earned from buying and selling.  Excessive trading may be evidenced from such high “turnover rates” as well as high “cost to equity ratios,” a ratio calculated from comparing the costs in the account to the equity.    Customers usually lose large percentages of money when their accounts are excessively traded, and broker-dealers are often best placed to detect and stop such trading, though they rarely do.

Finally, FINRA announced that Oppenheimer & Co., Inc. has failed to make timely disseminations to FINRA regarding their brokers, which meant that the investing public and other broker-dealers did not get necessary information in a timely manner.

Malecki Law has previously investigated and successfully handled securities arbitrations against Oppenheimer & Co., Inc. and certain of the firm’s brokers in the past.  If you believe you have suffered losses as a result of questionable actions taken in your account, please contact us immediately for a confidential consultation.