IMPARTIAL CONDUCT STANDARDS
OPPENHEIMER & CO. INC.
IMPARTIAL CONDUCT STANDARDS
June 9, 2017
The following policies and procedures have been adopted by Oppenheimer & Co. Inc. (“Oppenheimer”) in accordance with the requirements of the Best Interest Contract Exemption (”BICE”) issued by the U.S. Department of Labor (“DOL”). The BICE permits financial services firms and their representatives to receive variable compensation in connection with investment recommendations to clients with respect to certain tax-advantaged investment accounts (“Retirement Accounts”), provided that all requirements of the BICE are met. One of the requirements of the BICE is that a financial services firm adopt and monitor adherence to impartial conduct standards with respect to advice given to Retirement Accounts.
1. Retirement Accounts
The following types of Retirement Accounts are covered under these procedures.
a. IRAs, such as Traditional IRAs, Roth IRAs, inherited IRAs, rollover IRAs, Simplified Employee Pension (SEP) IRAs, Saving Incentive Match Plan for Employees (SIMPLE) IRAs, and Salary Reduction Simplified Employee Pension (SARSEP) IRAs;
b. Archer Medical Savings Accounts;
c. Health Savings Accounts (HSAs);
d. Coverdell Educational Savings Accounts;
e. Tax-qualified benefit plans sponsored by employers that cover their employees and that are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), such as defined benefit pension plans and defined contribution plans (“ERISA Plans”);
f. Individual participant accounts under any ERISA Plan that is a defined contribution plan, such as an ERISA 403(b) or 401(k) plan, for which the client is the beneficial owner, and
g. Tax-qualified benefit plans that do not cover any employees, which therefore are not subject to Title 1 of ERISA (Non-ERISA Plans), such as Keogh Plans and solo 401(k) plans maintained by sole proprietors.
2. These procedures have been designed to ensure that on and after June 9, 2017 Oppenheimer Financial Advisors adhere to the following standards in providing investment recommendations to Retirement Accounts.
a. Fiduciary Advice that is in Best Interest of Retirement Account.
Oppenheimer Financial Advisors must provide investment advice that is in the best interest of Retirement Accounts at the time that the investment advice is given. Such advice must meet a professional standard of care that reflects the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of another enterprise of like character with similar aims. In addition, such advice must be based on the investment objectives, risk tolerance, financial circumstances and needs of the Retirement Account without regard to competing financial or other interests of the Oppenheimer Financial Advisor, Oppenheimer or any affiliate or related party.
b. Documentation of Best Interest Advice.
Oppenheimer Financial Advisors will generally be requested to document the basis for any investment advice given to a Retirement Account including a recommendation to buy, sell or hold an investment, or to invest in a particular fee-based advisory program or switch to another fee-based advisory program. Such documentation shall be in the form attached to these procedures as Appendix A - Purchase and Appendix A - Sale.
c. Reasonable Compensation.
Oppenheimer Financial Advisors may not recommend any advisory programs or transactions for Retirement Accounts that would cause Oppenheimer, the Financial Advisor or any affiliates to receive compensation, directly or indirectly, that is more than “reasonable compensation” within the meaning of Section 408(b)(2) of ERISA or Internal Revenue Code Section 4975(d)(2). Oppenheimer has adopted procedures that specify the types of programs or products that may be recommended to Retirement Accounts. Programs or products not specified in these procedures may not be recommended to Retirement Accounts. Oppenheimer will monitor on a quarterly basis whether the range of compensation payable by Retirement Accounts or by third parties in connection with transactions by such accounts is reasonable compensation using, where available, independent benchmarks and other industry information.
d. Statements Not Misleading.
Statements by Oppenheimer Financial Advisors about a recommended program or transaction, related fees and compensation, conflicts of interest and other matters to the responsible person for a Retirement Account must not be materially misleading at the time they are made.
3. Conflicts of Interest
a. Matrix of Conflicts of Interest.
Oppenheimer has identified financial interests that could affect the exercise of an Oppenheimer Financial Advisor’s best judgment in rendering fiduciary advice or making an investment recommendation to a Retirement Account. Attached as Appendix B is a matrix that identifies the compensation that may be earned by Oppenheimer and by Oppenheimer Financial Advisors that vary based on the particular investment or advisory program that is recommended to a Retirement Account.
b. Limitations on Differential Compensation Earned by Oppenheimer Financial Advisors.
Compensation paid by Oppenheimer to Financial Advisors in connection with services provided to a Retirement Account may vary by investment product or advisory program if Oppenheimer has determined that the relative magnitude of the compensation for the product or program is based on neutral factors, such as complexity of a product or the time required to explain it.
Oppenheimer Financial Advisors will not be permitted to receive gifts or entertainment, either directly or indirectly, from mutual fund companies, fund managers, fund selling agents or third party separate account managers. This prohibition shall not include fund or manager logoed items with a value of less than $50 or lunches or meals provided on business premises and in the course of educational presentations.
c. Restrictions on Quotas.
Oppenheimer will not use bonuses, contests, special awards or other incentives that could be expected to cause its Financial Advisors to make recommendations to Retirement Accounts that are not in the best interest of the Retirement Accounts.
d. Revenue Sharing.
Oppenheimer may receive revenue sharing and payments for shelf space from sponsors of mutual funds that may be offered to Retirement Accounts. Oppenheimer Financial Advisors receive a portion of any sales load charged and a portion of the 12b-1 fee paid by such funds to Oppenheimer for their servicing of the Retirement Account. However, any revenue sharing payments made by sponsors of mutual funds to Oppenheimer or payments for shelf space are retained by Oppenheimer and not paid to Oppenheimer Financial Advisors. Sponsors of hedge funds pay a portion of their management fee and incentive fee, if any, to Oppenheimer with respect to Retirement Accounts invested in such funds. Oppenheimer pays a portion of such management fees and incentive fees to the Oppenheimer Financial Advisor who services the Retirement Account. Payments to Oppenheimer Financial Advisors with respect to hedge funds may be higher than the compensation that would be received from other products. This is because hedge funds are more complex products than other products and take more time to review, monitor and explain to clients.
e. Independence of Oppenheimer Research.
Oppenheimer’s Investment Research Department maintains a list of recommended equity securities (“Recommended List”). The Recommended List is available to Oppenheimer Financial Advisors but they are not obligated to recommend any investments on the Recommended List to their clients. Oppenheimer Financial Advisors do not receive any additional compensation from Oppenheimer if they recommend securities on the Recommended List to their clients.
f. Supervision for Financial Advisors.
Investment recommendations of products or programs made by Oppenheimer Financial Advisors will be reviewed by a designated supervisor.
g. Excluded Investments.
Oppenheimer may exclude certain investments or mutual fund share classes from being available for recommendation to Retirement Accounts or for Retirement Accounts over or under a certain size if Oppenheimer believes that recommendations of those investments for such Retirement Accounts may be inconsistent with Oppenheimer’s fiduciary duty.
h. Burn-Off Periods.
Oppenheimer may establish a “burn-off” period of eighteen months, during which, an Oppenheimer Financial Advisor will not earn any additional compensation for recommending that a Retirement Account switch to another investment during that period that would result in compensation to the Financial Advisor. This shall also include the conversion of ‘b’ or ‘c’ class shares when transferred to fee-based advisory accounts.
i. Training for Financial Advisors.
Oppenheimer Financial Advisors who make recommendations to Retirement Accounts will be required to complete periodic training and education on the requirements of BICE, the Impartial Conduct Standards and other fiduciary rules, as well as Oppenheimer policies and procedures regarding the duty to act as a fiduciary with respect to recommendations made for Retirement Accounts.
j. Maximum Limits on Compensation.
A Financial Advisor may have the ability to determine the level of fee-based or commission-based compensation that is charged to a Retirement Client (by determining whether or not to discount from maximum fees or commission rates). Oppenheimer may impose a minimum or maximum limit on any such compensation to be charged to a Retirement Account.
k. Disclosures under BICE.
Effective January 1, 2018, Oppenheimer will make certain disclosures to Retirement Accounts, as required by the BICE, before or at the time that an investment recommendation is consummated. On and after such date, other disclosures (e.g., the costs and fees of a recommended transaction) will be made upon the request of a Retirement Account. Financial Advisors will be required to provide disclosures that have been prepared and approved by Oppenheimer for such purpose.