Oppenheimer settles SEC charges

The firm will pay a six-figure penalty and return approximately $2.3m in capital commitments to investors as part of its settlement with regulators.

Following an investigation that has nearly stretched two years, the US Securities and Exchange Commission has charged two investment advisors at Oppenheimer & Co. with misleading investors about the valuation policies and performance of a private equity fund they manage.

In a settlement Oppenheimer, agreed to pay a $617,579 penalty and return $2,269,098 to investors. Oppenheimer will pay an additional penalty of $132,421 to the Commonwealth of Massachusetts in a related action taken by the Massachusetts Attorney General.

Oppenheimer will pay approximately $150,000 to the City of Brockton’s pension fund, $200,000 to Quincy’s pension fund, and a statutory penalty of more than $130,000 to Massachusetts, according to a statement from the Massachusetts Attorney General's office.

In addition, Oppenheimer must make changes to its valuation policies and internal controls.

According to the SEC, Oppenheimer Asset Management and Oppenheimer Alternative Investment Management misled investors by stating that the fund’s holdings of other private equity funds were valued based on the underlying managers estimated values. However, the portfolio manager of the Oppenheimer fund inflated that estimate in their own reporting to give the appearance of enhanced returns, according to the charges. 

The SEC’s order also found Oppenheimer lied to investors about using a third-party valuation firm, when in fact it was Oppenheimer’s investment manager who came up with the estimated value. The firm also told investors that the fund was audited by independent auditors, when in fact this particular investment was unaudited, according to the SEC.

The charges come soon after a US district court ruling on a lawsuit against Oppenheimer brought by investors. Last week the court dismissed accusations of fraud against the firm on account of its partnership shares being sold via private placements, meaning they were not subject to certain federal securities laws.