Democrats blast SEC for not banning bad-acting firm

Congressional Democrats criticized a decision by the Securities and Exchange Commission to give an investment firm that committed wrongdoing a waiver to continue business.

A pair of prominent Democrats argued that the recent move by the SEC granting a waiver to Oppenheimer & Co. to allow it to continue to engage in some business shows weakness and an inability to truly punish wrongdoing in the financial sector.

{mosads}In January, the broker-dealer agreed to pay $20 million and admit wrongdoing after facing charges it ignored “red flags” indicating money laundering by customers or notify regulators of the illegal activity.

But the same day the firm reached the settlement, the SEC voted 3-2 to waive a rule that would have automatically banned the firm from engaging in some investment activity for five years.

That move led to public dissent from the two Democrats at the regulator, and high-ranking lawmakers are following suit.

Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee, said Wednesday the move suggested regulators thought some firms were “too big to bar.” She vowed to craft legislation that would force a tougher stance with bad acting firms.

“Investors and the American public are greatly disserved when our regulators throw away valuable enforcement tools and adopt a policy of ‘too-big-to-bar,’” she said in a statement. “I will be working with my Democratic colleagues to craft a legislative solution that sends a strong message to the markets that wrongdoers like Oppenheimer will be sufficiently held accountable for their misdeeds.”

Sen. Jack Reed (D-R.I.), a senior member of the Senate Banking Committee, also blasted the SEC decision, calling it a “disservice to investors.”

Lawmaker criticism emerged after the two Democratic SEC commissioners, Luis Aguilar and Kara Stein, issued a public dissent for the waiver decision. The two noted that Oppenheimer has faced at least 30 different regulatory actions for various violations of securities law, arguing the firm had shown itself to be a repeat violator that needed to be punished.

“The facts demonstrate that Oppenheimer has a failed compliance culture, from top to bottom,” they wrote.

In its decision to waive the ban, the SEC noted that Oppenheimer had agreed as part of the most recent settlement to hire a law firm to review its policies, as well as give employees training to ensure compliance.