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Oppenheimer to pay $35 million to settle charges

June 6, 2012
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NEW YORK—Oppenheimer Funds agreed to pay more than $35 million to settle government charges that it misled investors who invested in two of its bond funds.

The Securities and Exchange Commission said Wednesday that Oppenheimer bought complex mortgage-backed securities in 2008 that increased the level of risk at a high-yield bond fund called the Oppenheimer Champion Income Fund and an investment-grade fund called the Oppenheimer Core Bond Fund.

As part of agreements that the funds entered into by buying the complex investments, they had to come up with cash when the value of the mortgage securities fell dramatically during the financial crisis.

The funds were forced to sell significant portions of their bond holdings to raise the cash which resulted in losses for bond investors. However, the funds didn't disclose this to their investors.

"Mutual fund providers have an obligation to clearly and accurately convey the strategies and risks of the products they sell," said Robert Khuzami, director of the SEC's Division of Enforcement. "Candor, not wishful thinking, should drive communications with investors, particularly during times of market stress."

Oppenheimer said in a statement that the funds have neither admitted nor denied the SEC's allegations in reaching the settlement. Oppenheimer said it has replaced the portfolio management team that was responsible for the funds at the time.

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