The NASD has charged Oppenheimer & Co. and the firm's CEO Albert Lowenthal for intentionally supplying flawed data in response to its request for firms' breakpoint discount practices on sales of Class A shares. Separately, the NASD has also fined the firm $250,000 for failing to report broker misconduct to regulators, brokerages and the public.
After the NASD discovered in a March 2003 report that nearly one in three mutual fund purchases of Class A shares that would have qualified for breakpoint discounts didn't receive them, the NASD asked 2,000 broker/dealers to trace any breakpoints they gave in 2001 and 2002 and to report on their breakpoint policies.
But Oppenheimer included sales of other share classes in its report, thus diluting its sampling of Class A transactions, and although the firm's CEO was fully aware of this mistake, the firm submitted its report without calling the error to the NASD's attention.
The NASD, nonetheless, discovered the problem with the data and asked Oppenheimer to resubmit a report focusing solely on breakpoints in Class A shares. However, instead of assigning the report to a new executive, Lowenthal gave it back to the person who had made the mistake in the first place, only to terminate this individual a few months later without immediately reassigning the report to anyone else. Five months later, Oppenheimer gave the NASD a second breakpoint report, but again, it erroneously included information on Class B shares and failed to include discount or sales charge percentages. The NASD says it still has not received Oppenheimer & Co.'s breakpoint report.
Separately, the NASD found that Oppenheimer & Co. failed to report on 230 instances of problems with its brokers, including terminations, customer complaints and regulatory actions, for which the NASD has fined the firm $250,000.