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ARS Update: Lots of People Talking About Oppenheimer

Posted by Larry Doyle on January 12, 2012 10:06 PM |

Last we checked on the ARS crisis two months back, we learned that the crowd at Oppenheimer was on pace to repay its ARS holders over the next 50 years. Yep, 50 years. How swell.

Well, one lucky Oppenheimer customer will get her money back a lot sooner than that. Who might that be? 

Nicole Davi Perry.

How so? As the Wall Street Journal reported the other day, Panel Says Oppenheimer Must Buy Back $6 Million in Auction-Rate Securities:

Oppenheimer & Co. must buy back nearly $6 million in auction-rate securities from an investor, a Financial Industry Regulatory Authority arbitration panel has decided.

The investor, Nicole Davi Perry, alleged breach of fiduciary duty and negligence, among other claims, related to auction-rate securities she purchased in 2007 through the unit of Oppenheimer Holdings Inc. (OPY).

Oppenheimer in 2010 reached settlements with Massachusetts and New York regulators investigating the company’s marketing and sale of auction-rate securities.

Perry and her father, Ronald Davi, were seeking safety and liquidity but were never told what the instruments really were or the risks they entailed, said their attorney, Glenn Gitomer.

As is customary, the panel didn’t explain the reasoning for its decision, which was dated Thursday. It ruled that Oppenheimer must repurchase Perry’s New Jersey Turnpike Authority auction-rate securities for $5.98 million and pay her roughly $134,000 in attorneys’ fees.

“We disagree with the decision of the arbitration panel based on the testimony and evidence introduced at the hearing,” an Oppenheimer spokesman said.

Is that right, Oppenheimer disagrees? What a surprise.

Based on the countless numbers of other investors who have engaged me regularly over the last few years, they too maintain that ARS were sold to them by Oppenheimer while the firm breached its fiduciary duty and was negligent in the process. Why are ALL these investors held hostage? Why can’t this case serve as the precedent for the multitude of other Oppenheimer investors similarly mistreated?

I will share with the crowd at Oppenheimer, from Bud Loewenthal on down, that more and more people both inside and outside of your firm are increasingly enraged at the cavalier manner in which Oppenheimer has gone about refunding the ARS sold by your firm.

Many of these people have informed me that the expected refunding of ARS by Oppenheimer to be announced later this month can only be defined as a pittance.

Just as we were watching and highlighting on your 10Q from September 30th, Sense on Cents will continue to watch for other reports emanating from your firm. In fact, Sense on Cents does not have to watch all that closely because as I said a LOT of people inside and outside of your firm are watching closely and sharing a whole lot of info.

How many shares are you planning on refunding in the latest quarter? As few as people are indicating? Are you sure you really want to do that?

That might not look so good….


Is this really any way to run a business?

Questions and comments always encouraged and appreciated. Anybody from Oppenheimer have anything to say, especially about the testimony and evidence presented in the case referenced above? I am sure the many people who are talking about your firm would love to hear from you.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • Tom

    Oppenheimer & Co treats clients like scum. DO NOT INVEST WITH OPPENHEIMER & CO – go with the competition.

  • mikaele

    Should everyone call this Gitmore attorney and follow the same path? I never asked for these, they were purchased by our FA and for complete liquidity to construct a home. He knew we needed cash like as the statements read. 50 years?
    What would you do, I’m tired of beating the dead horse.

    Mahalo LD

  • James

    Very good post.

    Two days ago I received a letter stating that I’d be getting one share (25k) as part of the Oppenheimer-New York “six month review” (that routinely takes 8 months.)

    Those with over $1 million at Opco at the time of the freeze get zilch. That’s $1 million in total at Opco at time of freeze – you could have had 50k in ARS and 950 grand in stocks, and you would not be eligible for this month’s buyback.

    This, after 8 months ago, everyone got two shares (50k) including those with over a million at the time of the freeze.

    We’re going backwards.

  • Peter S.

    So not only has Oppenheimer failed in it fiduciary duty to those unwitting investors who trusted the firm, Oppenheimer now has the audacity to publically bicker with the self regulating body that they have chosen to provide unbiased arbitration.

    Evidently Oppenheimer doesn’t have a public relation officer.

    Let me share two suggestions to Oppenheimer that I have given to my twelve year old son. First, always stand up like a man and take responsibility for you actions. Second, just because you think it, does not mean that you can say it.

    Are people still investing with this firm?

  • Dave

    Larry, in addition to Oppenheimer taking 50 years to repay the auction rates clients, I think it needs to be noted that discount brokerage E trade just paid back all their auction rate clients in full. E trade, as many of your readers probably know, has been a reported takeover target for a couple years, amidst reports the firm was teetering on insolvency. Yet it repaid its ripped off clients in full. As did Morgan stanley, merrill, Goldman SAchs, Fidelity, TD Ameritrade, UBS, on and on and on.

    Oppenheimer treats its clients like crap. Why invest with them? If things so south, THE FIRM WON’T BE THERE FOR YOU. Other firms have proven they’ll work with clients, and probably redeem them, if the unthinkable happens. Why the hell would anyone give a dime to Oppenheimer?

  • Mark J. Novitsky

    Good thing Mary Schapiro…then in charge of FINRA was able to “luckily “dump FINRA’s ARS position right before the collapse. Or should I say “front-running” / Insider Trading?

  • matt

    Just went to FINRA’s website to check on the details of the decision. The posting on the arbitration wgich was there a few days after, has mysteriously disappeared. What’s up with that?

  • Ben

    Matt – the award is still on the website.

    Mikaele and James – why haven’ you sued Oppenheimer? How much in ARS are you holding?

    • Kathy

      Ben, they’re not suing because the fine print of their “agreements” with Opco include requirement to arbitrate. Arbitration is a crapshoot which includes financial industry reps as arbitrators.

      The financial industry backed clients into a corner – as if it planned to fleece them and leave them powerless. How convenient.

      • Ben


        You are incorrect. In FINRA arbitration, which is what they would sue under, there are three arbitrators appointed. Of the three, either all three, or two of the three, would not be industry reps. Instead, they are outside the industry and, many times, are lawyers. As you can see from the above article, Ms. Perry was able to force Oppenheimer to repurchase all of her ARS and pay her attorneys’ fees. They are most certainly not powerless as you suggest. A good securities lawyer can pick Oppenheimer apart just like in the Perry case.

  • Glenn Gitomer

    I recently became aware of your blog and was curious to read Matt’s January 20, 2012 posting indicating that my award had been removed from FINRA Arbitration Awards Online. I brought this to FINRA’s attention and the award has been restored to its database. Please do not hesitate to contact me with any questions:

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