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Item 3. Legal Proceedings

2022-02-28 compared with 2021-03-01 · 35 added, 10 removed, 27 unchanged (63% of the section changed)

7 unchanged sentences

However, the Company's results of operations could be materially affected during any period if liabilities in that period differ from prior estimates.

Notwithstanding the foregoing, an adverse result in any of the matters set forth below or multiple adverse results in arbitrations, litigations or regulatory proceedings currently filed or to be filed against the Company, could have a material adverse effect on the Company's results of operations and financial condition, including its cash position.

Notwithstanding the foregoing, multiple adverse results in arbitrations, litigations or regulatory proceedings currently filed or to be filed against the Company, could have a material adverse effect on the Company's results of operations and financial condition, including its cash position.

The materiality of legal and regulatory matters to the Company's future operating results depends on the level of future results of operations as well as the timing and ultimate outcome of such legal and regulatory matters.

See "Risk Factors — "Management's Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Matters and Developments" and "Management's Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting 'Forward-Looking Statements'" in Item 7.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting 'Forward-Looking Statements'" in Part I, Item 2.

In accordance with applicable accounting guidance, the Company establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and reasonably estimable.

1 unchanged sentence

In some of the matters described below, loss contingencies are not probable and reasonably estimable in the view of management and, accordingly, the Company has not established reserves for those matters.

For legal or regulatory proceedings where there is at least a reasonable possibility that a loss or an additional loss may be incurred, the Company estimates a range of aggregate loss in excess of amounts accrued of $nil to approximately $5.0 million.

This estimated aggregate range is based upon currently available information for those legal proceedings in which the Company is involved, where an estimate for such losses can be made.

6 unchanged sentences

As previously disclosed, Oppenheimer, without admitting or denying liability, entered into a Consent Order (the "Order") with the Massachusetts Securities Division (the "MSD") on February 26, 2010 and an Assurance of Discontinuance ("AOD") with the New York Attorney General ("NYAG" and together with the MSD, the "Regulators") on February 23, 2010, each in connection with Oppenheimer's sales of ARS to retail and other investors in the Commonwealth of Massachusetts and the State of New York.

Pursuant to the terms of the Order and AOD, the Company commenced and closed twenty-one offers to purchase ARS from customer accounts when the Company's latest offer to purchase was fully accepted on September 24, 2020.

Pursuant to the terms of the Order and AOD, the Company commenced and closed twenty offers to purchase ARS from customer accounts when the Company's latest offer to purchase was accepted and implemented on September 27, 2021.

As of December 31, 2021, the Company had purchased and holds (net of redemptions) $37.0 million of ARS pursuant to settlements with the Regulators and legal settlements and awards.

As of December 31, 2020, the Company has no remaining commitments to purchase ARS as a result of legal settlements and awards.

Oppenheimer has agreed with the NYAG that it will offer to purchase Eligible ARS from Eligible Investors who did not receive an initial purchase offer, periodically, as excess funds become available to Oppenheimer.

At December 31, 2020, the Company has $1.3 million of ARS to purchase from Eligible Investors related to the settlements with the Regulators.

At December 31, 2021, the Company has no remaining commitments to purchase ARS related to settlements with the Regulators.

Further, Oppenheimer has agreed to (1) no later than 75 days after Oppenheimer has completed extending a purchase offer to all Eligible Investors (as defined in the AOD), use its best efforts to identify any Eligible Investor who purchased Eligible ARS (as defined in the AOD) and subsequently sold those securities below par between February 13, 2008 and February 23, 2010 and pay the investor the difference between par and the price at which the Eligible Investor sold the Eligible ARS, plus reasonable interest thereon;

(2) no later than 75 days after Oppenheimer has completed extending a Purchase Offer to all Eligible Investors, use its best efforts to identify Eligible Investors who took out loans from Oppenheimer after February 13, 2008 that were secured by Eligible ARS that were not successfully auctioning at the time the loan was taken out from Oppenheimer and who paid interest associated with the ARS-based portion of those loans in excess of the total interest and dividends received on the Eligible ARS during the duration of the loan (the "Loan Cost Excess") and reimburse such investors for the Loan Cost Excess, plus reasonable interest thereon;

and (3) upon providing liquidity to all Eligible Investors, participate in a special arbitration process for the exclusive purpose of arbitrating any Eligible Investor's claim for consequential damages against Oppenheimer related to the investor's inability to sell Eligible ARS;

Oppenheimer believes that because of Items (1) through (3) above will occur only after it has provided liquidity to all Eligible Investors, it will take an extended period of time before the requirements of items (1) through (3) will take effect.

If Oppenheimer fails to comply with any of the terms set forth in the Order, the MSD may institute an action to have the Order declared null and void and reinstitute the previously pending administrative proceedings.

If Oppenheimer defaults on any obligation under the AOD, the NYAG may terminate the AOD, at his sole discretion, upon 10 days written notice to Oppenheimer.

and (3) upon providing liquidity to all Eligible Investors, participate in a special arbitration process for the exclusive purpose of arbitrating any Eligible Investor's claim for consequential damages against Oppenheimer in relation to the investor's inability to sell Eligible ARS.

On December 9, 2021, Oppenheimer mailed a notice to clients holding auction rates at Oppenheimer in February 2008 informing them of the provisions (1)-(3) above.

On January 24, 2022, Oppenheimer sent a duplicate notice in accordance with the terms of the AOD.

Reference is made to the Order and the AOD, each as described in Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2009 and attached thereto as Exhibits 10.24 and 10.22 respectively, as well as the subsequent disclosures related thereto in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 through September 30, 2021 and in the Company's Annual Reports on Form 10-K for the years ended December 31, 2010 through and including 2020, for additional details of the agreements with the MSD and NYAG.

As of December 31, 2021, the Company has no remaining commitments to purchase ARS as a result of legal settlements.

In January 2015, a complaint in an action styled Sands Brothers Venture Capital II, LLC v.

Park Avenue Bank et.

was filed in New York Supreme Court, New York County.

Plaintiffs are four venture capital funds who in 2008 and 2009 collectively purchased five notes from a company known as O2HR LLC in amounts totaling $3,533,978.

O2HR defaulted on the notes, and the plaintiffs are seeking damages sounding in fraudulent conveyance from a large number of parties, including Oppenheimer, in this and three other actions in New York, as well as other actions in Kentucky.

The New York actions have been consolidated for purposes of pretrial discovery;

it is an open question as to whether those cases will be consolidated for trial as well.

Plaintiffs do not allege that Oppenheimer itself received any of O2HR’s funds, only that Oppenheimer gave material assistance to others who diverted O2HR cash for less than fair value.

Oppenheimer’s motion for summary judgment was denied on May 2, 2020;

Oppenheimer has appealed that ruling and that appeal remains pending.

In November 2021, plaintiffs and Oppenheimer agreed to settle the complaint with Oppenheimer paying plaintiffs $310,000 in exchange for a full release of claims.

On August 31, 2021, a complaint in a class action entitled 6694 Dawson Blvd, LLC, Individually and on Behalf of a Class of Similarly Situated Persons v.

Oppenheimer & Co.

Inc., James Wallace Woods, Michael J.

Mooney, Britt Wright, William V.

Conn, Jr., Conn & Co.

Tax Practice, LLC, Conn & Company Consulting, LLC and Kathleen Lloyd, was filed in the U.S.

District Court for the Northern District of Georgia.

Plaintiff purports to represent a class of investors in Horizon Private Equity, III, LLC (“Horizon”).

Horizon is alleged to be a fraudulent scheme and plaintiff is seeking unspecified damages sounding in violations of the Georgia RICO statute, breach of fiduciary duty, procurement of breach of fiduciary duty, negligent misrepresentation, aiding and abetting fraud, unjust enrichment, punitive damages and attorneys’ fees.

Plaintiff does not allege Oppenheimer received any of the funds invested in Horizon, but rather that Oppenheimer’s failure properly to supervise its employees allowed the alleged scheme to occur and continue.

Oppenheimer believes these claims to be without merit and intends to vigorously defend itself against the claims made in this action.

In addition to the class action described in the preceding paragraph, Oppenheimer has also been named as a Respondent in fourteen arbitrations, many containing multiple claimants, each filed before FINRA, relating to investments made by former Oppenheimer clients and certain third parties who Oppenheimer believes were not clients but who allegedly invested in Horizon.

Claimants allege many of the causes of action alleged in the class action described in the preceding paragraph.

The arbitrations claiming specific monetary losses allege damages of approximately $25.0 million in the aggregate while others claim unspecified damages.

Oppenheimer believes these claims to be without merit and intends to defend itself vigorously against these claims.

MINE SAFETY DISCLOSURES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings