The Financial Industry Regulatory Authority fined Oppenheimer & Co. Inc. US $2.5 million for failing to supervise one of its former salespersons, Mark Hotton, who stole money from his clients and churned their accounts from November 2005 to February 2009. During this time, claimed FINRA, Mr. Hotton convinced some of his clients to wire funds from their Oppenheimer and personal bank accounts to entities he owned or controlled. Among other alleged violations, FINRA charged Oppenheimer with (1) not conducting an adequate pre-hire review of Mr. Hotton; (2) not supervising Mr. Hotton adequately when it became aware of civil actions alleging he defrauded business partners out of millions of dollars; (3) not responding to red flags that showed Mr. Hotton was wrongfully wiring customer funds to entities he owned or controlled; and (4) not taking appropriate action after the firm’s analysts detected Mr. Hotton was overtrading some customer accounts. At the time of his hire, Mr. Hotton’s FINRA registration record disclosed 12 reportable events, including two criminal charges, a termination for cause, a New York Stock Exchange investigation, a personal bankruptcy and seven customer complaints. The firm only reviewed the information in the public filing, claimed FINRA, and did not seek any additional information, including court filings, to better understand any unique risks Mr. Hotton’s hiring might cause. In addition to paying a fine, Oppenheimer agreed to remit restitution to customers in excess of US $1.25 million, and to retain a consultant to help the firm develop better policies and procedures related to wire transfers, registration and termination filings, and excessive trading. Mr. Hotton was sentenced to 34 months in prison in October 2014 for defrauding the producers of the Broadway show “Rebecca – The Musical” in a scheme involving fictitious overseas investors. (Click here for details.)