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Oppenheimer Pays $3.75 for Broker Supervisory Failures

Oppenheimer Pays $3.75 for Broker Supervisory Failures


The Financial Industry Regulatory Authority (FINRA) announced it has fined Oppenheimer & Co. Inc. $2.5 million and ordered the firm to pay restitution of $1.25 million for failing to supervise Mark Hotton, a former Oppenheimer broker who stole money from his customers and excessively traded their brokerage accounts. FINRA also permanently barred Mark Hotton from the securities industry in August 2013.

FINRA’s chief of enforcement said the case was a prime example of an unscrupulous broker and a poor supervisory structure causing severe customer harm. He also stated firms must ensure that they implement supervisory systems that are reasonably designed to both identify and respond to red flags that may indicate broker misconduct.

FINRA found that Oppenheimer failed to supervise Hotton in multiple respects. First, Oppenheimer failed to adequately investigate Hotton prior to hiring him, even though FINRA records showed that he had 12 prior reportable events, including criminal charges and seven customer complaints. The firm also failed to place Hotton under heightened supervision despite learning, shortly after Hotton joined the firm, that his business partners had sued him for defrauding them out of several million dollars. Additionally, Oppenheimer failed to respond to numerous “red flags” in correspondence and wire transfer requests demonstrating that Hotton was wiring funds from Oppenheimer customer accounts to entities that he owned or controlled.  This allowed Hotton to transfer more than $2.9 million from those customers’ accounts. Finally, Oppenheimer failed to adequately supervise Hotton’s trading of his customers’ accounts despite the fact Oppenheimer’s compliance exception reports detected Hotton was trading the accounts at demonstrably excessive levels.

In addition, FINRA found that Oppenheimer failed to make more than 300 required filings to FINRA about some of its brokers in a timely manner. On average, these filings were over 200 days late and therefore the investing public and other broker-dealers were made aware of serious allegations made against Oppenheimer’s registered representatives in a timely fashion.  Also, during the course of FINRA’s investigation, Oppenheimer repeatedly failed to provide timely responses to FINRA requests for documents and other information

Oppenheimer has paid more than $6 million to resolve customer arbitration claims related to its supervision of Hotton. FINRA ordered $1.25 million in restitution to 22 additional customers who suffered losses but had not filed arbitration claims.

As is customary in such settlements, Oppenheimer neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Colling Gilbert Wright are experienced in representing investors in cases where brokerage firms fail to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover. If you have suffered investment losses, please contact us today.