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Broadway ‘scammer’ costs Oppenheimer & Co. $3.75M penalty

By
Kevin Dugan
Published March 27, 2015, 5:40 a.m. ET

The case of Broadway scammer Mark Hotton is getting an encore — before regulators.

The Financial Industry Regulatory Authority fined Oppenheimer & Co. $3.75 million for failing to supervise the disgraced ex-broker even after he was accused of other frauds.

Despite “red flags,” Oppenheimer did nothing to stop Hotton from transferring nearly $3 million of client funds to accounts he controlled, Finra said Tuesday.

Hotton, 48, was sentenced to 34 months in prison in October for ruining a planned Broadway production of “Rebecca,” the 1938 psychological thriller by Daphne du Maurier. The Long Islander scammed the show’s producers out of $65,000 in finder fees after promising to raise $4.5 million from investors.

Hotton, who was banned from the industry two years ago, is one of the more dubiously decorated ex-brokers, with 30 “disclosure events” on his Finra record. He faces $3 million in pending complaints, says the regulator.

“As this case demonstrates, the combination of an unscrupulous broker and a lax supervisory structure can cause severe customer harm,” Brad Bennett, the chief of enforcement for Finra, said in a statement.

“Firms must ensure that they implement supervisory systems that are reasonably designed to both identify and respond to red flags that may indicate broker misconduct.”

Finra detailed eight years of violations related to Hotton in its complaint.

Oppenheimer failed to properly vet Hotton before he was hired even though he faced criminal allegations including larceny and possession of stolen property.

Following Hotton’s departure, it took the company two years to produce e-mail review records after Finra originally requested them.

Even after Oppenheimer discovered Hotton had hidden his connection to outside businesses, the firm didn’t identify 31 wire transfers totaling almost $3 million over a three-year period that ended in 2009, according to the settlement.

“In spite of the red flags, Oppenheimer failed to place Hotton on heightened supervision, terminate him, or supervise him in any way that was different from other registered representatives at the firm,” Finra said.

The firm neither admitted nor denied the allegations in the settlement.

Hotton lawyer Ira London didn’t answer messages seeking comment.