Oppenheimer Fined for Misleading Investors

On March 11, 2013, the Securities and Exchange Commission ("SEC") announced that it charged two investment advisers at Oppenheimer & Co. with misleading investors about the valuation policies and performance of a private equity fund, the Oppenheimer Global Resource Private Equity Fund I L.P. From around October 2009 to June 2010, Oppenheimer marketed the fund to investors as one that invests in other private equity funds. The fund was marketed to pension funds, foundations, and endowments, as well as high-net-worth individuals and families. Oppenheimer is accused of investment fraud for misrepresenting the performance of at least one of the fund's holdings.

The SEC found that Oppenheimer Asset Management and Oppenheimer Alternative Investment Management disseminated misleading quarterly reports and marketing materials stating that the fund's private equity fund holdings were valued "based on the underlying managers' estimated values." But Oppenheimer actually valued its fund's largest investment at an amount that was much greater than the underlying private equity fund manager's estimated value. Specifically, Oppenheimer marked up the internal rate of return of one private equity fund from the 3.8% return estimated by the manager of the underlying private equity fund all the way to 38.3%. This made the Oppenheimer fund's performance appear to be significantly better than it was.

Oppenheimer agreed to pay more than $2.8 million to settle the SEC's charges. The Massachusetts Attorney General's office today announced a related action and an additional financial penalty against Oppenheimer.

The type of violations that Oppenheimer was cited and fined for go to the heart of investors' trust and confidence in Wall Street. Investors have the right to expect and receive honest and fair information from investment professionals. The type of dishonest and misleading information that Oppenheimer conveyed to investors undermines the integrity of our financial system.

As part of its punishment, Oppenheimer agreed to pay a $617,579 penalty and return $2,269,098 to those who invested in the fund during the time period when the misrepresentations were made. Oppenheimer will pay an additional penalty of $132,421 to the Commonwealth of Massachusetts in the related action taken by the Massachusetts Attorney General.

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