FINRA fined Oppenheimer & Co., Inc. $675,000 and ordered the firm to pay over $246,000, plus interest, in restitution to customers FINRA says were charged unfair prices due, in part, to the firm's supervisory failures. The Authority additionally suspended and fined Oppenheimer's lead municipal securities trader, ordering David Sirianni to pay $100,000 for the unfair pricing violations.
FINRA Case #2009018102501 (Oppenheimer)
FINRA Case #2009018102502 (David P. Sirianni)
According to the findings, investigators reviewed Oppeneheimer's 2008-2009 municipal securities transactions and discovered that Sirianni in his capacity as head trader charged excessive markups over the course of 89 transactions, costing customers over $231,000.
The investigation states that Sirianni's markups ranging from 5.01% to 15.57% were not disclosed to Oppenheimer customers with markups exceeding 9.4% in 54 (or 61%) of the 89 transactions.
In its findings, FINRA singled out Sirianni, concluding he violated the Securities Act of 1933 by failing to disclose the excessive markups charged and engaging in inappropriate transactions.
Investigators found that Sirianni effected this series of violations by first purchasing municipal securities from a third party broker-dealer on behalf of Oppenheimer. He then allegedly held the bonds in inventory for at least one night and then resold the bonds to customers the next day or later at an excessive markup.
Even though Sirianni allegedly "alone was responsible" for setting prices for Oppenheimer customers, FINRA found that Oppenheimer itself failed to detect the excessive markups because its supervisory system was "deficient."
In reviewing Oppenheimer's supervisory procedures, FINRA found that the firm generated a 3% Markups Report—in which sales with a markup greater than 3% were identified and listed for the purpose of compliance review—but only did so for intra-day trades, or only those instances when the firm bought and then sold a bond during the course of the same day.
Because Sirianni's method of operation was to acquire bonds on one day and hold them at least overnight, his sales were inter-day and accordingly would not appear on the firm's 3% Markups Report nor on any other surveillance report generated by or on behalf of Oppenheimer's compliance department.
As a result of this key oversight, according to FINRA, Oppenheimer was unable to detect the red flags posed by Sirianni's excessive markups, which could have contributed to the determination of Oppenheimer charging an "unfair and unreasonable price" in 104 municipal securities transactions.
Bonds involved included a Maricopa County, Arizona Pollution Control Revenue Bond (5.19% markup), Suffolk County, Alabama Baptist Medical Centers bond (5.86%), Indiana State Health Facilities bond (5.02%), Wisconsin State Health and Educational Facilities bond (6.21%), New York Dowling College Revenue Bond (13.67%) and the San Francisco City & County CA ARPTS bond (5.70%).
If you have invested with Oppenheimer & Co., Inc., David P. Sirianni, or with any broker or firm whom you suspect has charged excessive markups, commissions or fees that have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.