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Home > Cases > Oppenheimer Auction Rate Securities > Oppenheimer & Company Auction Rate Securities Overview

Massachusetts' William Galvin Charges Oppenheimer & Co. Over Auction-Rate Securities Sales

Another financial firm is on the hook and facing charges for violating securities laws in the sale of auction rate securities. This time it's Oppenheimer & Co. The complaint against the investment bank marks the first time a securities regulator has charged a so-called “downstream broker” for its role in selling the auction rate securities to customers.

In the complaint, Massachusetts Secretary of State William Galvin alleges that Oppenheimer not only grossly misrepresented the risks of auction rate securities to investors, but also falsely characterized the stability of the ARS market in general when it marketed and sold ARS products to clients.

When the auction-rate market seized up in February 2008, Oppenheimer's customers in Massachusetts could not access nearly $60 million of their money.

Oppenheimer & Co. is a unit of Oppenheimer Holdings Inc.

Galvin also charges that in January and February 2008, Oppenheimer's senior executives unloaded nearly $3 million of their own personal holdings in auction rate securities because of what they believed was severe impending trouble in the ARS market. At the same time, however, Oppenheimer continued to push the instruments onto unsuspecting clients.

The Massachusetts charges, filed Nov. 18, include separate counts of fraud violation and dishonest and unethical conduct. As part of the complaint, Galvin is demanding that Oppenheimer & Co. rescind sales of auction rate securities at par and make full restitution to investors who already sold the auction rate securities at a loss.

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