NASD Charges Oppenheimer & Co. With Thwarting Investigation, Late and Inaccurate Reporting of Thousands of Muni Bond Transactions
Washington, D.C.—NASD announced today that it has charged Oppenheimer & Co., Inc., formerly known as Fahnestock & Co., Inc., with failing to cooperate in an NASD investigation; failing to retain business-related electronic mail, as required by federal securities law and NASD rules; and, violating Municipal Securities Rulemaking Board (MSRB) rules by failing to report some bona fide municipal bond transactions, reporting others that were never effected, and reporting thousands of other trades late and inaccurately.
"Oppenheimer's failure to fully and accurately report municipal bond transactions deprived the investing public and market participants of critical information," said NASD Vice Chairman Mary L. Schapiro. "And all firms have a fundamental obligation to cooperate fully with NASD in its investigations."
NASD charged Oppenheimer, headquartered in New York City, with multiple violations of its obligation to report municipal securities transactions to the MSRB timely and accurately. NASD found that between January 2003 and May 2004, Oppenheimer failed to report more than 6,100 municipal bond transactions with other dealers to the MSRB on a timely basis - and in many cases, the reports were inaccurate when they were finally made. Oppenheimer also inaccurately reported the price, time and other required details of hundreds of municipal bond transactions with retail customers in May and June 2003.
In addition, Oppenheimer is charged with reporting more than 1,300 retail municipal bond transactions that were never effected, and failing to report over 700 completed transactions with retail customers.
NASD has also charged Oppenheimer with violating its obligation to cooperate with an NASD investigation in two ways. First, NASD requested information from Oppenheimer in September 2004 concerning Oppenheimer's retention of electronic communications for 20 employees, most of whom traded municipal securities and were thus critical to NASD's investigation into the trade reporting problems. Despite one extension of time to respond and repeated communications with NASD, Oppenheimer never provided NASD with the information requested.
Second, in August 2003, NASD requested that Oppenheimer provide certain trade confirmations for municipal securities transactions NASD was investigating. NASD, on several occasions, reiterated its request for Oppenheimer to produce the confirmations. Despite those repeated requests, NASD did not receive the requested documents until over a year after the original request.
NASD charged that from July 1, 2002 through at least the first quarter of 2004, Oppenheimer failed to retain and preserve electronic communications between its employees, instead allowing its employees to delete e-mails. Firms are obligated under federal securities laws and NASD Rules to retain electronic communications for at least three years. Oppenheimer also was charged with supervisory failures - regarding its email retention system and procedures, and regarding its municipal bond trade reporting system.
Under NASD rules, a firm or individual named in a complaint can file a response and request a hearing before an NASD disciplinary panel. Possible remedies include a fine, censure, suspension, or bar from the securities industry, disgorgement of gains associated with the violations, and payment of restitution.
The issuance of a disciplinary complaint represents the initiation of a formal proceeding by NASD in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, interested persons may wish to contact the respondent before drawing any conclusions regarding the allegations in the complaint.
Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2004, members of the public used this service to conduct more than 3.8 million searches for existing brokers or firms and requested almost 190,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at www.nasdbrokercheck.com. Investors can also access this service by calling 1-800-289-9999.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web Site at www.nasd.com.