February 4, 2015 / 8:46 PM / 4 years ago

UPDATE 1-U.S. SEC commissioners release public dissent on Oppenheimer waiver

(Adds comment from Oppenheimer)

By Sarah N. Lynch

WASHINGTON, Feb 4 (Reuters) - Two top U.S. regulators issued a scathing dissent on Wednesday blasting the Securities and Exchange Commission for granting Oppenheimer Holdings Inc a regulatory waiver despite the brokerage’s history of repeat violations over anti-money laundering practices and other problems.

SEC Democratic Commissioners Kara Stein and Luis Aguilars’ joint statement comes roughly one week after subsidiary Oppenheimer & Co agreed to pay $20 million to settle charges by the SEC and the U.S. Treasury Department’s Financial Crimes Enforcement Network alleging it ignored red flags that helped pave the way for illegal penny stock sales.

The commissioners said they were dismayed by the SEC’s decision to grant a waiver that lets the brokerage continue doing certain private capital-raising deals because the waiver lacks adequate safeguards to ensure the firm is complying with the law.

The waiver was granted, they said, based on assurances from Oppenheimer that it will hire a law firm to monitor its compliance, but there is nothing in writing to ensure the firm they hire is “qualified and independent.”

“Regrettably, the conditions in this bad actor waiver lack teeth,” Stein and Aguilar wrote.

They also lambasted the SEC for turning “a blind eye” to Oppenheimer’s repeat offenses.

“These violations are just the most recent chapter in a long and unfortunate history of regulatory failures ... cumulatively indicative of a wholly failed compliance culture,” they wrote.

“In fact, since 2005, there have been at least 30 separate regulatory actions against Oppenheimer for numerous violations of securities laws and rules,” they added.

An Oppenheimer spokesman said in a statement on Wednesday that the company’s board plans to “engage a fully independent law firm” to review the compliance environment.

“The company is dedicated to putting these issues behind it through the adoption of a strong compliance infrastructure,” he added.

Regulatory waivers such as the one granted to Oppenheimer have become a lightening rod at the SEC since last spring, when Stein and Aguilar started raising questions.

In a statement issued last year, Stein publicly dissented over another regulatory waiver granted to the Royal Bank of Scotland Group Plc, after one of its units pleaded guilty to manipulating the Libor benchmark interest rate.

Federal securities laws automatically disqualify companies that break criminal laws or commit fraud from engaging in certain activities, such as private capital deals.

But companies can apply to the SEC and other regulators for waivers or exemptions that let them continue the activities as long as certain conditions are met.

In the past, the SEC routinely granted waivers with little fanfare, but Stein and Aguilar have shaken things up by calling more attention to the issue. (Reporting by Sarah N. Lynch; editing by Susan Heavey, G Crosse)

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