NEW YORK Dec 9 A U.S. financial industry regulator said on Monday that it has fined brokerage firm Oppenheimer & Co and its head municipal securities trader for overcharging municipal bond customers.
The Financial Industry Regulatory Authority, or FINRA, an independent body that oversees brokerage firms, said it would fine Oppenheimer $675,000 and order restitution to customers of more than $246,000 for 89 transactions from July 1, 2008, through June 30, 2009.
FINRA also said it would fine David Sirianni $100,000 and suspend him for 60 days.
"FINRA has no tolerance for firms or individuals who charge customers excessive markups. Oppenheimer charged customers unfair prices in numerous municipal securities transactions and failed to properly supervise municipal securities transactions with its customers," said Thomas Gira, FINRA's head of market regulation.
Price discovery in the municipal bond market is not as transparent as in the stock market where live prices are instantaneously available to all investors. That makes it easier for municipal bond traders to charge retail investors higher prices than more sophisticated money managers would get.
FINRA said that Oppenheimer through Sirianni priced the 89 customer transactions from 5.01 percent to 15.57 percent above the firm's cost and that 54 of the transactions had markups of over 9.4 percent. Oppenheimer, said FINRA, had failed to detect the overcharging.
Neither Oppenheimer nor Sirianni admitted or denied the charges but consented to "the entry of FINRA's findings," FINRA said. Neither Oppenheimer nor Sirianni could immediately be reached for comment.