Wall Street powerhouse Oppenheimer & Co. agreed to pay federal regulators $20 million to settle charges ranging from insufficient anti-money-laundering controls to selling penny stocks for customers in unregistered offerings, the Securities and Exchange Commission said Tuesday.
Oppenheimer, said the SEC, agreed to admit wrongdoing and pay the agency $10 million. It will also pay the Treasury Department’s Financial Crimes Enforcement Network $10 million to settle parallel charges.
In a conference call with reporters, the chief of the SEC’s enforcement division, Andrew Ceresney, said Oppenheimer was “significantly deficient” on a number of fronts.
At issue is Oppenheimer’s handling of its customer Gibraltar Global Securities, based in the Bahamas and charged with misconduct in 2013 by the SEC. Gibraltar is not registered to do business in the United States as a securities dealer, but was in fact doing that because Oppenheimer looked the other way as 7.6 billion of shares from 92 different issuers of penny stocks were sold.
Those sales generated about $12 million in profit, said the SEC, and Oppenheimer earned $588,400 in commissions. The company is a broker-dealer, meaning it executes stock trades on behalf of clients as a broker, and for itself, as a dealer.
Oppenheimer essentially let a foreign financial institution operate in the U.S. market under the radar, said regulators.
Regulators said that Oppenheimer settled similar charges for $2.8 million in 2005, and over a period from 2008 to 2014 missed numerous red flags that should have alerted to illicit activity. Jennifer Shasky Calvery, director of Treasury’s FinCEN, said Oppenheimer failed to monitor for money laundering threats.
The Wall Street firm, she added, failed to file required Suspicious Activity Reports and failed to notify Gibraltar about banks that were blacklisted under the USA Patriot Act and denied access to the U.S. financial system. There is no evidence that Gibraltar helped banks tied to Syria and North Korea access the U.S. financial system, she confirmed.
Because Oppenheimer is a repeat offender, the Tuesday settlement raised questions about why no executives from the company were charged.
Ceresney said the SEC’s investigation was continuing “and the matter is not closed. That’s all I can say about individuals at this point.”