Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, October 30, 2007

FINRA Fines Oppenheimer for Inaccurate Breakpoint Data

FINRA fined Oppenheimer & Co. Inc. $1 million for submitting mutual fund breakpoint data to FINRA that the firm knew to be inaccurate, as well as for related supervisory deficiencies. FINRA also ordered the firm to engage an independent consultant to evaluate its policies, systems and procedures for responding to information requests from regulators.  FINRA's (then NASD) initial request to Oppenheimer for a breakpoint assessment was made in March 2003 as part of a review of approximately 2,000 broker-dealers that sold front-end load mutual funds in 2001 and 2002. That request followed findings by NASD and other regulators that showed that nearly one in three mutual fund transactions in front-end load mutual funds that appeared eligible for a breakpoint discount did not receive one. 

FINRA found that on two occasions, June 11, 2003, and Nov. 20, 2003, Oppenheimer submitted inaccurate and incomplete data in response to NASD's request to perform a self-assessment of its mutual fund breakpoint discount practices. Each of Oppenheimer's self-assessment submissions so completely and fundamentally failed to comply with the regulatory request that FINRA was unable to rely on Oppenheimer's data to analyze the firm's breakpoint compliance both in absolute terms and in relation to the approximately 2,000 other registered firms that contemporaneously submitted breakpoint self-assessments.

Oppenheimer settled the matter without admitting or denying the charges, but consented to the entry of FINRA's findings and dismissal of charges against Oppenheimer CEO Albert Grinsfelder Lowenthal.

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