Wall Street's watchdog sanctioned Oppenheimer & Co a total of $3.75 million on Thursday for failing to supervise a former broker who is now serving a prison sentence for defrauding the producers of Broadway production "Rebecca - The Musical."

The Financial Industry Regulatory Authority (Finra) said it fined Oppenheimer & Co, a unit of Oppenheimer Holdings Inc, $2.5 million and ordered it to pay $1.25 million in restitution for its supervision lapses related to Mark Hotton, whom Finra permanently barred from the securities industry in 2013.

Hotton stole more than $2.9 million from Oppenheimer's customers by transferring their funds to entities he either owned or controlled, FINRA said. Oppenheimer did not try to stop the transfers and other misconduct, despite "red flags," Finra said.

Oppenheimer also did not properly vet Hotton before hiring him, even though his record at the time included criminal charges and seven customer complaints, Finra said.

The firm, in a settlement with Finra, neither admitted nor denied FINRA's allegations.

Hotton left Oppenheimer more than six years ago, an Oppenheimer spokesman said. The firm "has significantly enhanced its policies regarding hiring and supervision of brokers," the spokesman said.

Hotton, who was prosecuted earlier by federal authorities, pleaded guilty in 2013 to two counts of wire fraud in connection with schemes to defraud a Connecticut real estate company as well as the producers of "Rebecca," a Broadway musical.

A gothic thriller based on the 1938 Daphne du Maurier novel, "Rebecca" was slated to debut onstage in 2012 but was canceled because of a financing shortfall and the scandal.

Prosecutors said Hotton had promised the show's producers he could secure millions of dollars in funding to cover a $4 million budget shortfall in return for various fees, plus reimbursement of expenses.

Hotton later claimed to have found four foreign investors willing to provide $4.5 million, but prosecutors said the men were fictitious, according to court records.