SEC Commissioner Kara Stein recently described what many saw as a possible model for harsher bad actor waivers after settling a matter with the SEC. According to Ms. Stein “The waiver was for a limited time, and only if certain conditions were met, creating essentially a probationary period for the firm with a right to reapply after a second showing of good cause. And the conditions are important. For example, the recent case included a review by an independent compliance consultant, and a document signed by the principal executive or principal legal officer when the consultant’s recommendations have been implemented.” Ms. Stein added “This approach represents a breakthrough in the Commission’s method of handling waivers, and I hope to see more of this and other thoughtful approaches in the future.” She also remarked “Each waiver request should receive an individualized, detailed, and careful analysis based on all of the relevant facts and the particular waiver policy.”
Many wondered if her remarks actually foreshadowed a change in policy by the SEC in granting waivers. The question may now be answered. The SEC charged Oppenheimer & Co. with violating federal securities laws while improperly selling penny stocks in unregistered offerings on behalf of customers. Oppenheimer agreed to admit wrongdoing and pay $10 million to settle the SEC’s charges.
The SEC granted Oppenheimer a waiver as a bad actor under Rule 506(d). The SEC’s order says “Oppenheimer will comply with the conditions stated in its December 10, 2014 waiver request letter, including that it will retain a law firm to review its policies and procedures relating to Rule 506 offerings, and that it will adopt improvements or changes, both as private placement agent in its investment banking business and as issuer and as compensated solicitor in its wealth management business. Oppenheimer’s waiver is also conditioned upon its completing firm wide training for all registered persons on compliance with Rule 506 of Regulation D.”
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