Oppenheimer & Co. Complaints
We are actively investigating customer complaints against Oppenheimer & Co. Below is a sampling of similar complaints filed against Oppenheimer. These complaints may be different from yours and may be based on allegations from investors. If you or someone you know would like us to evaluate a claim against Oppenheimer, please contact us at (212) 203-9300.
Karl Hahn Incident
From March 2009 until July 2010, former Oppenheimer & Co. investment advisor Karl Hahn solicited a client to invest more than $2 million in what Hahn described as a real-estate-secured loan to three individuals who would return the money with substantial interest within 90 days. According to the Securities and Exchange Commission, Hahn told his customer “that no one could know about the investment” because he was forbidden from transacting investment business outside his member firms: Deutsche Bank, where he was employed when he initially solicited the investment, and Oppenheimer., where he moved in June 2009. Over the course of 2009 and 2010, he directed his client to send the money to a bank account controlled by one of Hahn’s relatives, so as to conceal the investment from his employers.
As it turned out, there was no loan, nor any real estate collateralizing it. According to the SEC, “Hahn simply used the victim’s money to pay personal expenses.” In 2011 he was barred by the New Hampshire Bureau of Securities Regulation. In 2017 he pleaded guilty to wire fraud charges and was sentenced to 18 months in prison.
Karl Hahn represents one dramatic instance in a long history of misconduct by representatives of Oppenheimer & Co. Over the last ten years alone, securities regulators have ordered the firm to pay millions in fines and restitution over fraud and other sales practice violations, on top of many millions more it’s paid out in arbitration awards to unhappy customers.
Mark Hotton: Oppenheimer Rep's Broadway Ripoff
Oppenheimer & Co. once made national headlines courtesy of its former broker Mark Hotton, who in 2013 pleaded guilty to “conspiring to launder the illicit proceeds of almost two decades of fraud,” according to prosecutors. Hotton operated a series of securities and mail fraud schemes from 1995 to 2012, obtaining millions of dollars in his victims’ funds and laundering them to pay cash wages to his employees while avoiding taxes and other payments. The New York Times reported in 2012 that Hotton even defrauded producers of the Broadway musical Rebecca, using “a fictitious loan and phantom investors” to obtain $60,000 before authorities caught up to him. As part of that scheme, he allegedly created an entity called “Trinity Management Consulting Corporation,” which purported to be a “multi-billion-dollar international company but was actually a shell company he used to funnel money elsewhere,” according to the Wall Street Journal.
In 2013, a FINRA panel found Oppenheimer & Company liable for failing to supervise Mark Hotton, granting two customers an award of $2.35 million. Two years later, FINRA fined Oppenheimer & Co. $2.5 million for its failures to supervise Hotton and ordered the firm to pay $1.25 million in restitution to his victims. A FINRA investigation found that the firm failed to properly vet Hotton before hiring him; failed to implement heightened supervisory procedures for him after learning he had been sued for fraud before joining the firm; failed to address red flags of his conduct, and failed to supervise his trading activities even after firm analysts “detected Hotton was trading the accounts at presumptively excessive levels.” By the time of this sanction, according to FINRA, Oppenheimer had already paid at least $6 million in arbitration awards to Hotton’s former customers.
Oppenheimer Executes $750 Million in Early UIT Rollovers
In 2019 FINRA hit Oppenheimer & Company with a sanction over sweeping failures to supervise premature rollovers of unit investment trust products. Unit investment trusts, or UITs, are exchange-traded mutual funds that purchase and hold a fixed portfolio of securities set to mature on a specific date. They are typically long-term investments with fees tied to that maturity date; when financial advisors recommend that investors roll over UITs before the maturity date, they typically incur higher sales charges for the investor, which may be unsuitable.
A FINRA probe found that between 2011 and 2015, Oppenheimer & Company conducted UIT transactions totaling more than $6.4 billion, “$753.9 million of which were early rollovers.” Unfortunately, the firm’s supervisory procedures “were not reasonably designed to supervise the suitability of those early rollovers,” and did not even generate any automated reports or alerts of possible unsuitable transactions. Because of this, the firm was unable to identify premature UIT rollovers whose cumulative sales charges may have been more than $3.8 million more than customers would have spent otherwise, according to FINRA.
FINRA ordered the firm to pay a fine of $800,000 as well as restitution of $3.8 million to affected customers. In a statement, FINRA’s Department of Enforcement Acting Head Jessica Hopper said, “FINRA member firms must be mindful of costs to customers when recommending a product, particularly when recommending that customers make short-term sales of products that are intended as long-term investments. Providing restitution to investors remains a top priority for FINRA.”
Elderly Investors Suffer From Oppenheimer's Unsuitable ETFs Trades
Non-traditional exchange traded funds are complex, risky investments typically considered most appropriate as short-term investments for sophisticated investors. When FINRA released a notice in 2009 about the risks of non-traditional ETF products, Oppenheimer & Company established supervisory procedures that barred the solicitation of retail investors to invest in non-traditional ETFs as well as the execution of unsolicited non-traditional ETF investments for retail clients who didn’t meet various thresholds, including a liquid asset minimum.
A 2016 FINRA sanction found that Oppenheimer & Company failed to enforce these supervisory procedures, allowing its representatives to conduct “more than 30,000 non-traditional ETF transactions totaling approximately $1.7 billion” for its investors, including those who didn’t meet the criteria for unsolicited trades. According to FINRA, the firm had no adequate supervisory procedures to keep track of non-traditional ETF holding periods in retail customer accounts. As a result, some of the firm’s retail clients “held non-traditional ETFs in their accounts for weeks, months and sometimes years, resulting in substantial losses.”
The firm additionally failed to perform adequate due diligence of the non-traditional ETFs it recommended to its customers, according to FINRA, resulting in the solicitation and execution of unsuitable ETF purchases. Some of the retail customers affected included an 89-year-old with a conservative investment profile and $50,000 in annual income, who held their ETF positions “for an average of 32 days… resulting in a net loss of $51,857”; a 91-year-old with a conservative investment profile and $30,000 in income, whose average ETF holding period of 48 days led to losses of $11,161; and a 67-year-old with a conservative investment profile and $40,000 in income, who sustained a loss of $2,746 after holding two non-traditional ETF positions for a period of 729 days.
As a result of these supervisory failures, FINRA ordered Oppenheimer & Co. to pay a fine of $2.25 million and restitution of more than $716,000 to customers who sustained losses as a result of unsuitable ETF trades.