Soreide Law Group has filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) against Oppenheimer & Co., Inc., an American brokerage firm. E. Matthew Steinberg, a financial advisor at the firm, allegedly made lackluster investment decisions causing significant financial losses for the retired South Florida claimant. However, it’s noteworthy that Steinberg is not named in the lawsuit, hence this particular case shines a light on the alleged firm-level negligence and FINRA violations.
Understanding the Case
It appears that the claimant’s wish was to generate safe retirement income from his investments. According to the allegations, Steinberg and Oppenheimer agreed to manage the client’s portfolio on a discretionary basis, which gave them the power to make investment decisions without having to consult the client for each transaction and a mandate to ensure the investments align with the client’s financial goals.
The claimant reportedly was advised that municipal bond default rates were less than 1%, providing an impression of low risk. However, the long-term portfolio, selected by Oppenheimer and Steinberg, fell into multiple defaults causing considerable losses for the claimant.
A Dose of Deception?
Matters reportedly worsened when Oppenheimer and Steinberg recommended that the claimant participate in a proprietary options program—the Portfolio Enhancement Program (PEP). An alleged whopping $1.25 million was borrowed on margin against the municipal bonds owned by the claimant to participate in this endeavor. This move was intended to generate an additional 5% yield safely, using hedged puts and calls.
The lawsuit claims that Oppenheimer failed to inform the claimant about the potential risks associated with PEP, suggesting that the firm had violated FINRA’s fair dealing rule. This rule mandates brokers to provide full and clear disclosures of material facts about the securities they recommend.
Unfolding The FINRA Violations
According to the arbitration claim, the alleged actions of Oppenheimer and Steinberg represent a series of FINRA violations, including breaches of fiduciary duty, failure to supervise, breach of contract, and fraud. As per this claim, the respondents even ignored FINRA’s suitability rule, which requires brokers to make recommendations that match the investor’s investment profile.
Let’s be clear – these allegations, if proved, represent a flagrant violation of FINRA rules and could have a deep impact on the portfolios of other clients invested through the firm. The claimant is seeking damages amounting to $2,500,000.00, a considerable sum that highlights the gravity of the alleged missteps.
Matthew Steinberg’s BrokerCheck report on the public FINRA website reveals a three-decade career in the securities industry. Steinberg has been working with Oppenheimer & Co since 1994 and has one customer dispute on his FINRA CRD report.
The unfortunate circumstance the claimant finds himself in underlines why clients need to be educated about their rights as investors and the duties of a brokerage firm and its representatives. While regulatory bodies like FINRA are fighting for transparency and fair dealing in the securities industry, investors are encouraged to stay informed and take necessary actions in case of any wrongdoings.