FINRA has fined Oppenheimer $525,000 for negligently misrepresenting cost basis information on more than 1,000 customer account statements and Forms 1099. The firm was also censured and consented to conduct a comprehensive review of the adequacy of its procedures, systems, and controls to track and report cost basis information relating to customer securities transactions.
Oppenheimer is a full-service broker-dealer that is headquartered in New York, New York. The firm has been a FINRA member since 1945. It has approximately 140 branch offices and over 1,900 registered representatives.
If you have lost money with Oppenheimer, contact FINRA arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Letter of Acceptance, Waiver, and Consent (“AWC”)
Oppenheimer and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on April 22, 2021, over findings that from January 2014 through December 2019, the firm negligently misrepresented cost basis information on more than 1,000 customer account statements and Forms 1099.
Cost basis is the original purchase price for a security, plus any commissions and fees. An adjusted basis is the cost basis for a security but adjusted per Internal Revenue Service (IRS) rules. Cost basis must be adjusted under IRS rules for routine corporate events, such as stock splits, mergers, and non-dividend distributions, as well as in other circumstances, such as inheritances. When a securities position is sold, net taxable gain or loss is calculated by taking the gross proceeds of the transaction and subtracting the adjusted basis of the securities sold.
In the early 2010s, tax reporting rules for broker-dealers changed in two ways: 1) Congress required broker-dealers to report adjusted basis on Forms 1099; and 2) Congress provided that when a customer sold a portion of a securities position with multiple tax lots—i.e., sets of shares purchased on different dates at different prices— broker-dealers had to report the sale pursuant to the first-in, first-out method (FIFO) unless the customer specifically identified which shares to sell. Under these requirements, in the absence of timely contrary instructions from the customer, broker-dealers are required to report the longest-held shares as sold first.
The AWC indicates that Oppenheimer made improper post-settlement cost basis changes for approximately 500 to 1,000 partial liquidations of securities positions in customer accounts. Oppenheimer maintained cost basis information, as well as information about the taxable gain or loss resulting from its customers’ securities transactions, in a database system. When a customer partially liquidated a securities position with multiple tax lots, Oppenheimer’s system defaulted to FIFO, unless the customer’s registered representative specified before settlement that the customer wanted to sell a specific tax lot, in accordance with IRS regulations.
During this period, registered representatives of the firm were permitted to request changes to cost basis information. However, because the individual who supervised the group that operated the database system described above did not understand the regulations applicable to post-settlement cost basis changes, Oppenheimer regularly granted requests to change cost basis information in the case of partial liquidations of securities positions—even when requests to change the tax lot sold were made after the settlement date. Emails and documents pertaining to these changes showed that the firm’s registered representatives, and other operations personnel, lacked a proper understanding of the regulations applicable to post-settlement cost basis changes.
By making negligent misrepresentations on customer account statements and Forms 1099, Oppenheimer violated FINRA Rule 2010. By making and preserving inaccurate customer account statements, Oppenheimer violated FINRA Rules 4511 and 2010.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with Oppenheimer, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.