OppenheimerFunds misled investors about souped-up funds: SEC

Firm allegedly failed to disclose use of derivatives in two funds adequately; agrees to pay $35M to settle the charges
FEB 27, 2012
OppenheimerFunds has agreed to pay $35 million to settle charges that the firm issued misleading statements about two of its mutual funds during the financial crisis. A Securities and Exchange Commission investigation found that OppenheimerFunds didn't adequately disclose the use of derivatives to add leverage to the Oppenheimer Core Bond Fund Ticker:(OPIGX) and the Oppenheimer Champion Income Fund Ticker:(OPCHX). “Mutual fund providers have an obligation to clearly and accurately convey the strategies and risks of the products they sell,” Robert Khuzami, director of the SEC's Division of Enforcement, said in a release. “Candor, not wishful thinking, should drive communications with investors, particularly during times of market stress.” In reaching a deal with the commission, OppenheimerFunds neither admitted to nor denied the SEC's findings. “We are pleased to have reached a settlement that we believe is in the best interests of the company and those investors that experienced losses during the period of unprecedented volatility and uncertainty that defined the global financial crisis,” Bill Glavin, chief executive of OppenheimerFunds Inc., said in a prepared statement. The added leverage, which was used to add “substantial” exposure to commercial-mortgage-backed securities to the funds, according to the SEC, backfired on the funds in 2008 when the real estate market collapsed. The Oppenheimer Core Bond Fund lost 36% in 200, while the average intermediate-term-bond fund lost 5%. The fund was the subject of several lawsuits because of its role in state Section 529 college savings plans. It settled the suits for an undisclosed amount in 2011. The Oppenheimer Champion Income Fund lost 78% of its value, 52 percentage points worse than the average high-yield-bond fund. Oppenheimer removed both funds' management teams in April of 2009.

Latest News

SEC to lose Hester Peirce, deepening a commissioner crisis
SEC to lose Hester Peirce, deepening a commissioner crisis

The "Crypto Mom" departure would leave the SEC commission with just two members and no Democratic commissioners on the panel.

Florida B-D, RIA owner pitches bold long-term plan to sell to advisors
Florida B-D, RIA owner pitches bold long-term plan to sell to advisors

IFP Securities’ owner, Bill Hamm, has a long-term plan for the firm and its 279 financial advisors.

Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships
Fintech bytes: Vanilla, Wealth.com forge new estate planning partnerships

Meanwhile, a Osaic and Envestnet ink a new adaptive wealthtech partnership to better support the firm's 10,000-plus advisors, and RIA-focused VastAdvisor unveils native integrations with leading CRMs.

Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions
Fiduciary failure: Ex-advisor who sold practice fined after clients lost millions

A former Alabama investment advisor and ex-Kestra rep has been permanently barred and penalized after clients he promised to protect got caught in a $2.6 million fraud.

Why the evolution of ETFs is changing the due diligence equation
Why the evolution of ETFs is changing the due diligence equation

As more active strategies get packaged into the ETF wrapper, advisors and investors have to look beyond expense ratios as the benchmark for value.

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management