Actions taken by the Securities and Exchange Commission have resulted in an agreement by Oppenheimer Funds Inc. to pay a whopping $35 million mutual fund fraud case settlement to bond fund investors who were allegedly misled about their investments with the fund. The crux of the matter is that investment fund managers have a fiduciary responsibility to inform investors of the truth regarding investments, no matter if that truth is good or bad. In this case, the management team failed to pass along information about losses.

In this mutual fund fraud case, the charges are that the company failed to let investors know about problems occurring in 2008 when mortgage-backed securities in their Oppenheimer Champion Income Fund and Core Bond Fund lost value and were transformed into higher risk investments. The Oppenheimer fund management team did not disclose important information to investors about their moves to sell off securities that had fallen in value, thus creating losses. That team has since been replaced, but Oppenheimer has not admitted or denied responsibility in the problem.

Securities and Exchange Commission regulations exist for the benefit of investors, who are to be given a fair shake in investment activities. No one wants to invest money with companies that claim benefits from investments under false pretenses. Hiding facts like losses incurred due to any factor is something that would cause investors harm and a loss of confidence that their money is being carefully handled.

Conditions of the loss of investment money during the 2008 maneuvers were largely sparked by the existing credit crisis and falling real estate values. Fund managers were forced to sell of funds at a loss in order to make required securities payments. The prospectus in 2008 for the Champion Fund and Core Bond Fund sold by Oppenheimer Funds Inc. did not explicitly inform investors about a practice of assuming leverage from derivative instruments called total return swaps (TRS) contracts. When conditions required Oppenheimer to raise cash to cover liabilities on the TRS contracts, they sent out misleading statements to investors.

Source:, “OppenheimerFunds to Pay $35 Million to Settle SEC Charges for Misleading Statements During Financial Crisis,” June 6, 2012

EN   ES   PT     

Miami Office
Grand Bay Plaza
2665 S. Bayshore Drive
Penthouse 2B
Miami, FL 33133
Telephone: 786.628.8236

Los Angeles Office
Available by Appointment
2029 Century Park East
Century Plaza Tower
Suite 400N
Los Angeles, CA 90067
Telephone: 424.544.7930

New York City Office
Available by Appointment
14 Wall St, 20th Floor
New York, NY 10005
Telephone: 917.382.5217

West Palm Beach Office
Northbridge Centre
515 N. Flagler Drive, Suite P-300
West Palm Beach, FL 33401
Telephone: 561.475.2887

Detroit Office
41000 Woodward Avenue,
Suite 350 East
Bloomfield Hills, Mi 48304
Telephone: 248.368.0182