Ex-Oppenheimer Employees Resolve SEC Charges Over Unregistered Penny Stock Sales

The Securities and Exchange Commission said that Scott A. Einsler, Arthur W. Lewis, and Robert Okin, three former Oppenheimer & Co. (OPY) employees, have settled charges involving the unregistered sales of billions of shares of penny stocks for a customer. The actions are related to part of an enforcement action that the brokerage firm settled with the regulator, as well as with the U.S. Treasury Department’s Financial Crimes Enforcement Network. Under that agreement, the firm paid $20 million to resolve those claims.

In this latest order instituting administrative proceedings that have been resolved, Eisler, who used to be a registered representative at an Oppenheimer Florida branch, is accused, along with former supervisor and branch manager Lewis, of executing the penny stock shares in illegal unregistered distributions. While securities laws grant exemption liability for brokers who make a reasonable inquiry into the facts involving the proposed sale of a customer, the SEC said that the two men did not make the required inquiry even though there were significant warning signs. Also, according to the regulator, Lewis and Okin, previously the head of the private client division, committed supervisory failures when they did not address the warnings.

To resolve the proceedings against him, Eisler consented to pay $50,000 and he will be barred from the securities industry and penny stock sales for a year. Lewis also will pay a penalty for the same amount and his bar from the industry in a supervisory capacity is also for a year. Okin will pay $125,000 and also serve a yearlong supervisory bar from the industry. All three men agreed to settle without denying or admitting to the SEC’s findings.

In the earlier case, brought by the SEC and FinCEN, the agencies charged Oppenheimer with violating securities laws through improper penny stock sales involving two parties. The firm paid each agency $10 million and admitted wrongdoing.

The SEC said that Oppenheimer’s misconduct involved aiding and abetting a customer’s illegal activity by disregarding the red flags. The customer in question was brokerage firm Gibraltar Global Securities, which is based in the Bahamas and is not registered to conduct business in the United States.

The regulator claims that Oppenheimer executed sales involving billions of shares of penny stocks supposedly for a proprietary account in the other firm’s name and was aware (or if not then it was reckless in not knowing) that the firm was executing transactions and providing brokerage services for underlying customers. A lot of these customers wee based in the US.

In the second purported misconduct, the SEC said that Oppenheimer engaged in similar penny stock sales for a second customer. The illegal penny stock sales of billions of shares resulted in about $12 million in profits and the firm received $588,400 in commissions.

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Former Oppenheimer Employees Settle Charges Involving Unregistered Sales of Penny Stocks, SEC, July 23, 2015

SEC Charges Oppenheimer With Securities Law Violations Related to Improper Penny Stock Sales, SEC, January 27, 2015