Newsletter Signup

Search Our Blog

Oppenheimer to Pay $20 Million to Settle With Regulators For Penny Stock Violations

By Nadia K. Ruyle Esq. of Shustak Reynolds & Partners, P.C. posted on Thursday, January 29, 2015.

Oppenheimer & Co has agreed to settle with the SEC and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for a combined $20 million in sanctions stemming from allegations the firm improperly sold penny stocks and ignored red flags.  As part of the settlement, Oppenheimer will admit wrongdoing and hire an independent consultant to review its policies over the next five years.

The SEC said Oppenheimer sold billions of shares of penny stocks in unregistered offerings on behalf of customers, sometimes aiding in customers’ illegal activity.  Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, stated “despite red flags suggesting that Oppenheimer’s customer’s stock sales were not exempt from registration, Oppenheimer nonetheless allowed unregistered sales to occur through its account, failing in its gatekeeper role.”  The actions against Oppenheimer demonstrate the SEC’s ongoing focus on compliance issues.

This settlement is a stark reminder that while penny stocks may be cheap, they are often risky due to low liquidity and poor reporting standards.  Low liquidity means it may be hard to find a buyer for a particular stock, and stock prices may be easier to manipulate.  There are, of course, many legitimate penny stock companies, but the Oppenheimer settlement serves as a warning to investors to proceed with caution — penny stocks can be high-risk investments and are not suitable for everyone.

Shustak Reynolds & Partners, P.C.’s New York, San Francisco, Irvine and San Diego securities, FINRA and SEC attorneys handle a wide range of securities and FINRA related issues and have substantial expertise and experience in the securities and brokerage business.  Contact us today for a confidential analysis of your situation.

Share This Article linkedin