OPY Oppenheimer Holdings Inc

Oppenheimer & Co. agreed to pay $3 million to settle regulatory charges that it sold leveraged and inverse exchange-traded funds to retail clients without reasonable supervision.

As part of the agreement, the company neither admitted nor denied the charges, but it did consent to the findings of the Financial Industry Regulatory Authority.

The allegations come as the Securities and Exchange Commission moves to limit the widely sold products amid concerns over how well retail investors understand them, even after nearly $30 billion has flowed into the products.

Finra said Oppenheimer didn't enforce its own policies to not encourage retail clients to purchase the nontraditional ETFs and to not executive customer's orders unless they met certain income and net worth criteria.

Oppenheimer will pay a $2.25 million fine and $716,831 in restitution to affected clients.

ETFs are typically meant to mimic the performance of underlying assets such as a group of stocks while remaining easier to trade than mutual funds. The leveraged versions use futures or derivatives to multiply the daily returns of an index, sometimes striving to double or triple the return. Inverse ETFs seek to return the opposite of the index. When these nontraditional ETFs are held for longer than a day, compounding can lead to returns that vary significantly from the underlying assets, making them unpredictable and risky to hold for longer periods.

Finra alleged that Oppenheimer solicited and executed nontraditional ETF purchases to retail customers who shouldn't have been allowed to have them.

For example, an unidentified 89-year-old customer with an annual income of $50,000 held 96 solicited nontraditional ETFs for an average of 32 days and lost $51,847, Wall Street's regulatory organization said.

From August 2009 to September 2013, more than 760 Oppenheimer representatives executed more than 30,000 nontraditional ETF transactions totaling about $1.7 billion, according to Finra.

In 2012, a number of other banks settled similar charges, paying more than $9.1 million.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

June 08, 2016 14:15 ET (18:15 GMT)

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