Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund

The SEC is charging Oppenheimer Alternative Investment Management and Oppenheimer Asset Management, which are two Oppenheimer & Co. investment advisers, with misleading customers about the valuation policies and performance of a private equity fund under their management. To settle the allegations, Oppenheimer will pay over $2.8M. It has also resolved the related action that was filed by Massachusetts Attorney General Martha Coakley.

According to the SEC, from 10/09 to 6/10, the two Oppenheimer investment advisers put out marketing collaterals and quarterly reports that were misleading and claimed that Oppenheimer Global Resource Private Equity Fund I L.P.’s holdings in private equity funds had values that were determined according to the estimated values of the underlying manager. In truth, contends the regulator, Oppenheimer’s portfolio manager actually valued the largest investment of the fund, Cartesian Investors-A LLC, at a markup that was considerable to the underlying manager’s estimated value. This discrepancy made it appear as if the fund’s performance was much better, per its internal rate of return. For example, at the conclusion of the quarter ending on June 30, 2009, the markup of the investment upped the internal return rate from 3.8% to 38.3%

Among the alleged misrepresentations made by ex-OAM employees to potential investors were:

· The rise in Cartesian’s value was because of a rise in its performance, when, actually, it was because of the new valuation method implemented by the portfolio manager.

· The false claim that a third-party valuation firm had written up Cartesian’s value.

· The false claim that independent third-party auditors had audited OGR’s underlying funds when actually Cartesian had not been audited.

Also, per the SEC, the policies and procedures of OAM were not reasonably structured to make sure that valuations given to existing and prospective clients were put forth in a way that was in line with written representations made to potential clients and actual investors. The Commission says that OAM’s conduct violated sections of the Securities Act of 1933, the Investment Advisers Act of 1940, and Rules 206(4)-8 and 206(4)-7.

Regarding the settlement with the state, the penalty there is $132,421. As for the over $2.8M to the SEC, $200,000 will go to the pension fund of the city of Quincy and $150,000 will go to the pension fund of the city of Brockton. Oppenheimer is also going to modify its internal controls and valuation policies.

If you think you may have suffered losses because your financial representative made misrepresentations and omissions that influenced or decision to make an investment, contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your first securities case assessment is free.

Oppenheimer & Co. to Pay Fine Over Fund, Wall Street Journal, March 11, 2013

Investment Advisers Act of 1940 (PDF)

Securities Act of 1933 (PDF)

More Blog Posts:

Oppenheimer Funds Investors Can Proceed with Their Securities Fraud Lawsuit, Stockbroker Fraud Blog, November 19, 2011

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement, Stockbroker Fraud Blog, August 17, 2011