The Securities and Exchange Commission today announced that three former employees of Oppenheimer & Co. Inc. have agreed to settle charges stemming from the unregistered sales of billions of shares of penny stocks on behalf of a customer. The actions involve a portion of the conduct announced in January in a settled enforcement action against Oppenheimer in which the broker-dealer admitted wrongdoing and paid $20 million to the SEC and the Treasury Department’s Financial Crimes Enforcement Network.
Today’s actions were instituted against 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’s orders instituting settled administrative proceedings, on behalf of the Oppenheimer customer, Eisler executed billions of penny stock shares in illegal unregistered distributions with Lewis participating in and in some cases approving the sales. Although securities laws provide an exemption from liability for brokers who engage in a reasonable inquiry into the facts surrounding a customer’s proposed sale, the SEC’s orders find that Eisler and Lewis failed to make the requisite inquiry despite substantial red flags associated with the sales.
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.”
Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement, added, “These actions show the SEC’s resolve in holding responsible individuals, including senior managers, when they violate the 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.
The SEC’s investigation was conducted by Margaret W. Smith with assistance from Christian Schultz and Matthew Scarlato. The case was supervised by Nina B. Finston and Jan Folena. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.