Olympia, WA - The Washington State Department of Financial Institutions (DFI) Division of Securities and the Colorado Division of Securities have entered into settlements with OppenheimerFunds Distributor, Inc. (OFDI) of Colorado and New York. OFDI is a registered securities broker-dealer, and is the principal underwriter and distributor for OppenheimerFunds, Inc. The settlements resolve a joint investigation into undisclosed exchange privileges in OppenheimerFunds.
OFDI entered into written agreements allowing select broker-dealers and investment advisers to make bulk exchanges between specific Oppenheimer mutual funds for customer accounts. Other firms could not make bulk exchanges unless they were the broker of record on the accounts. DFI alleged that the agreements were not disclosed in fund prospectuses or other documents distributed in the State of Washington, and that from 2000 through 2003, the exchanges resulted in dilution of mutual fund returns.
"OFDI failed to disclose these bulk exchange agreements to Washington investors,” said Scott Jarvis, Director of DFI. “Once OFDI entered into the agreements, they had a duty to monitor the exchanges to ensure they did not harm the funds involved. OFDI’s failure to adequately disclose and monitor the bulk exchanges violated the Securities Act.”
In settling the matter, OFDI neither admitted nor denied the allegations. OFDI consented to:
- Cease violations of the Securities Act
- Terminate the agreements
- Pay $394,500 in restitution to the impacted funds
- Pay a $200,000 fine, split evenly between Washington and Colorado
- Pay $175,000 for Washington’s costs of the investigation
“It is only by full and fair disclosure of material facts that investors can make informed choices about where to invest,” said Michael Stevenson, Director of DFI's Division of Securities. “Our primary goal in bringing this action was to protect the investing public from potential harm. By obtaining OFDI’s consent to terminate the agreements, we have helped level the playing field for mutual fund investors.”
Consent Order
View the Consent Order entered against OppenheimerFunds.