Three former employees of Oppenheimer & Co. Inc. have agreed to settle charges stemming from the unregistered sales of billions of shares of penny stocks, the SEC announced Thursday. It was just one part of a broader case that cost Oppenheimer millions earlier this year.
The broker-dealer in January agreed to pay $20 million to the SEC and the Treasury Department’s Financial Crimes Enforcement Network to settle its part of the case.
Thursday’s agreement was with three former employees: Scott A. Eisler, a former registered representative at Oppenheimer’s branch in Boca Raton, Fla.; his former branch manager and supervisor Arthur W. Lewis; and Lewis’s supervisor Robert Okin, a former head of Oppenheimer’s Private Client Division.
According to the SEC, Eisler executed sales of billions of penny stock shares in illegal, unregistered distributions with Lewis participating in the sales and in some cases approving them. Although securities laws provide an exemption from liability for brokers who properly supervise a customer’s proposed sale, the SEC’s orders find that Eisler and Lewis failed to heed the substantial red flags that would have told them these sales had to be registered, the SEC says.
The SEC’s orders found supervisory failures by Lewis and Okin because they did not respond to red flags that the individuals they supervised were violating federal securities laws.
“In the face of red flags that their customer’s stock sales were not exempt from registration, Oppenheimer’s branch personnel allowed these unregistered transactions to occur,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Okin, one of Oppenheimer’s senior-most executives, also failed to properly supervise by allowing these transactions to occur and failing to respond appropriately to the red flags suggesting violations of the federal securities laws.”
Eisler agreed to pay a $50,000 penalty and be barred from engaging in penny stock sales or working in the securities industry for at least one year. Lewis agreed to pay a $50,000 penalty and be barred from working in a supervisory capacity in the securities industry for at least one year. Okin agreed to pay a $125,000 penalty and be barred from working in a supervisory capacity in the securities industry for at least one year. They each agreed to the settlements without admitting or denying the SEC’s findings.