As filed with the Securities and Exchange Commission on August 6, 2009

____________________________________________________     

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549


FORM 10-Q


[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

        SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2009

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

       SECURITIES EXCHANGE ACT OF 1934

for the transition period from ___to___


Commission File Number: 1-12043


OPPENHEIMER HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

Delaware                       

  

98-0080034

(State or other jurisdiction of            

(I.R.S. Employer

incorporation or organization)            

Identification No.)


125 Broad Street

New York, New York  10004

(Address of principal executive offices)  (Zip Code)


(212) 668-8000

(Registrant’s telephone number, including area code)


20 Eglinton Avenue West, Suite 1110, Toronto Ontario Canada M4R 1K8

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [ X ]  No [  ]


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes    [ ] No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ] Accelerated filer [X] Non-accelerated filer [  ] Smaller reporting company [ ]


Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ]  No [X]


The number of shares of the Company’s Class A non-voting common stock and Class B voting common stock (being the only classes of common stock of the Company) outstanding on July 31, 2009 was 12,971,067 and 99,680 shares, respectively.




OPPENHEIMER HOLDINGS INC.

INDEX


   

Page No.

PART I

FINANCIAL INFORMATION

 

Item 1.     

Financial Statements (unaudited)

 
 

Condensed Consolidated Balance Sheets

as of June 30, 2009 and December 31, 2008

1

     
 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008

3

     
 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2009 and 2008

4

     
 

Condensed Consolidated Statements of Cash Flows

for the six months ended June 30, 2009 and 2008

5

     
 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2009 and 2008

7

     
 

Notes to Condensed Consolidated Financial Statements

8

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

     

Item 4.

Controls and Procedures

45

     

PART II

OTHER INFORMATION

 

Item 1.     

Legal Proceedings

47

Item 1A.

Risk Factors

49

Item 2.     

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.     

Defaults Upon Senior Securities

49

Item 4.     

Submission of Matters to a Vote of Security Holders

50

Item 5.     

Other Information

50

Item 6.     

Exhibits

51

 

SIGNATURES

52

 

Certifications

53

 

Exhibits

 


     




PART I

FINANCIAL INFORMATION


Item. 1  Financial Statements  


OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 
   


June 30,    2009

 


December 31, 2008

(Expressed in thousands of dollars)

 

ASSETS

       

  Cash and cash equivalents

 

$48,113

 

$46,685

  Cash and securities segregated for regulatory and

       

     other purposes

 

67,415

 

57,033

  Deposits with clearing organizations

 

20,737

 

14,355

  Receivable from brokers and clearing organizations

 

392,417

 

278,235

  Receivable from customers, net of allowance for

       

     doubtful accounts of $2.6 million ($2.0 million in 2008)

 

720,341

 

647,486

  Income taxes receivable

 

7,181

 

12,647

  Securities purchased under agreement to resell

 

161,399

 

-

  Securities owned, including amounts pledged of $3.6 million

       

     million ($1.9 million in 2008), at fair value

 

183,675

 

127,479

  Notes receivable, net

 

63,828

 

53,446

  Office facilities, net

 

24,998

 

27,224

  Intangible assets, net

 

47,588

 

50,117

  Goodwill

 

132,472

 

132,472

  Other

 

93,856

 

82,405

   

$1,964,020

 

$1,529,584


(Continued on next page)




The accompanying notes are an integral part of these condensed consolidated financial statements.



1





OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 
   


June 30,    2009

 


December 31, 2008

(Expressed in thousands of dollars)

 

LIABILITIES AND SHAREHOLDERS' EQUITY

       

Liabilities

       

  Drafts payable

 

$29,159

 

$52,565

  Bank call loans

 

86,600

 

6,500

  Payable to brokers and clearing organizations

 

437,022

 

159,648

  Payable to customers

 

334,085

 

408,303

  Securities sold under agreement to repurchase

 

169,780

 

-

  Securities sold, but not yet purchased, at fair value

 

59,648

 

27,454

  Accrued compensation

 

138,771

 

178,983

  Accounts payable and other liabilities

 

131,338

 

112,031

  Senior secured credit note

 

37,303

 

47,663

  Subordinated note

 

100,000

 

100,000

  Deferred income tax, net

 

1,280

 

4,538

  Excess of fair value of acquired assets over cost

 

6,173

 

6,173

   

1,531,159

 

1,103,858

         
         

Shareholders' equity

       

  Share capital

       

     Class A non-voting common stock

        (2009 – 12,971,067 shares issued and outstanding

         2008 – 12,899,465 shares issued and outstanding)

 



44,648

 



43,520

     Class B voting common stock

       

         99,680 shares issued and outstanding

 

133

 

133

   

44,781

 

43,653

  Contributed capital

 

38,044

 

34,924

  Retained earnings

 

350,712

 

348,477

  Accumulated other comprehensive loss

 

(676)

 

(1,328)

   

432,861

 

425,726

   

$1,964,020

 

$1,529,584




The accompanying notes are an integral part of these condensed consolidated financial statements.








2





OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)


 

Three months ended

Six months ended

 

June 30,

June 30,

 

2009

2008

2009

2008

Expressed in thousands of dollars, except per share amounts

       

REVENUES:

       

  Commissions

$142,713

$126,530

$266,509

$257,838

  Principal transactions, net

30,201

19,228

54,942

29,107

  Interest

8,668

17,126

16,190

35,146

  Investment banking

21,909

36,348

30,501

52,551

  Advisory fees

35,511

51,480

71,275

106,584

  Other

11,722

5,529

16,572

6,890

 

250,724

256,241

455,989

488,116

EXPENSES:

       

  Compensation and related expenses

167,902

168,313

308,564

340,709

  Clearing and exchange fees

6,735

8,473

12,473

16,241

  Communications and technology

14,530

18,488

34,281

35,459

  Occupancy and equipment costs

18,283

17,880

36,516

34,554

  Interest

5,043

11,528

10,586

23,670

  Other

25,255

29,374

43,415

62,086

 

237,748

254,056

445,835

512,719

Profit (loss) before income taxes

12,976

2,185

10,154

(24,603)

Income tax provision (benefit)

5,846

539

5,038

(10,135)

Net profit (loss) for the period

$7,130

$1,646

$5,116

$(14,468)

         

Profit (loss) per share:

       

   Basic

$0.55

$0.12

$0.39

$(1.07)

   Diluted

$0.54

$0.12

$0.38

$(1.07)

         

Dividends declared per share

$0.11

$0.11

$0.22

$0.22


The accompanying notes are an integral part of these condensed consolidated financial statements.



3






OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 (unaudited)


 

Three months ended

Six months ended

 

June 30,

June 30,

 

2009

2008

2009

2008

Expressed in thousands of dollars, except per share amounts

       

Net profit (loss) for the period

$7,130

$1,646

$5,116

$(14,468)

Other comprehensive income (loss):

       

Currency translation adjustment

535

494

(319)

511

Change in cash flow hedges, net of tax

170

659

420

64

Change in interest rate cap, net of tax

932

-

551

-

Comprehensive income (loss) for the period

$8,767

$2,799

$5,768

$(13,893)
























The accompanying notes are an integral part of these condensed consolidated financial statements.



4





OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


 

Six months ended

 June 30,

 

2009

2008

Expressed in thousands of dollars

   
     

Cash flows from operating activities:

   

Net profit (loss) for the period

$5,116

$(14,468)

Adjustments to reconcile net profit ( loss) to net cash used in operating activities:

   

   Non-cash items included in net profit (loss):

   

      Depreciation and amortization

6,381

5,584

      Deferred income tax

(3,258)

(6,238)

     Amortization of notes receivable

8,729

8,144

     Amortization of debt issuance costs

571

690

     Amortization of intangibles

2,529

2,527

     Provision for doubtful accounts

539

26

     Share-based compensation

6,759

(1,637)

   Decrease (increase) in operating assets:

   

      Cash and securities segregated for regulatory and other purposes

(10,382)

(11,202)

      Deposits with clearing organizations

(6,382)

(35,904)

      Receivable from brokers and clearing organizations

(114,182)

175,346

      Receivable from customers

(73,394)

(182,120)

      Income taxes receivable

5,466

(6,150)

      Securities purchased under agreement to resell

(161,399)

-

      Securities owned

(56,196)

(14,917)

      Notes receivable

(19,111)

(16,791)

      Other

(12,341)

35,276

   Increase (decrease) in operating liabilities:

   

      Drafts payable

(23,406)

(20,005)

      Payable to brokers and clearing organizations

278,345

(140,978)

      Payable to customers

(74,218)

44,805

      Securities sold under agreement to repurchase

169,780

-

      Securities sold, but not yet purchased

32,194

5,002

      Accrued compensation

(42,137)

3,961

      Accounts payable and other liabilities

19,307

68,530

      Income taxes payable

-

(11,020)

Cash used in operating activities

(60,690)

(111,539)

(Continued on next page)



5







OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) -Continued


 

Six months ended

 June 30,

 

2009

2008

Expressed in thousands of dollars

   
     

Cash flows from investing activities:

   

   Acquisitions, net of cash acquired

-

(50,335)

   Purchase of office facilities

(4,155)

(7,947)

Cash used in investing activities

(4,155)

(58,282)

     

Cash flows from financing activities:

   

   Cash dividends paid on Class A non-voting and Class B common stock

(2,881)

(2,994)

   Issuance of Class A non-voting common stock

-

5,738

   Repurchase of Class A non-voting common stock for cancellation

(559)

(9,437)

   Tax benefit (shortfall) from share-based compensation

(27)

698

   Issuance of subordinated note

-

100,000

   Senior secured credit note repayments

(10,360)

(20,375)

   Increase in bank call loans, net

80,100

127,300

Cash provided by financing activities

66,273

200,930

     

Net increase in cash and cash equivalents

1,428

31,109

Cash and cash equivalents, beginning of period

46,685

27,702

Cash and cash equivalents, end of period

$48,113

$58,811

     

Schedule of non-cash investing and financing activities:

   

Warrants issued

-

$10,487

Employee share plan issuance

$1,687

$2,046

     

Supplemental disclosure of cash flow information:

   

Cash paid during the periods for interest

$7,730

$16,446

Cash paid during the periods for income taxes

$3,064

$8,865




The accompanying notes are an integral part of these condensed consolidated financial statements.



6





OPPENHEIMER HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY (unaudited)

 
 

Six months ended

June 30,

 

2009

2008

Expressed in thousands of dollars

   
     

Share capital

   

Balance at beginning of period

$43,653

$53,054

Issuance of Class A non-voting common stock

1,687

7,784

Repurchase of Class A non-voting common stock for cancellation

(559)

(9,437)

Balance at end of period

$ 44,781

$51,401

     

Contributed capital

   

Balance at beginning of period

$34,924

$16,760

Issuance of warrant to purchase 1 million Class A non-voting common shares

-

10,487

Vested employee share plan awards

(177)

(355)

Tax benefit (shortfall) from share-based awards

(27)

698

Share-based expense

3,324

3,154

Balance at end of period

$38,044

$30,744

     

Retained earnings

   

Balance at beginning of period

$348,477

$375,137

Net profit (loss) for the period

5,116

(14,468)

Dividends ($0.22 per share in 2009 and 2008)

(2,881)

(2,994)

Balance at end of period

$350,712

$357,675

     

Accumulated other comprehensive income (loss)

   

Balance at beginning of period

$(1,328)

$(971)

Currency translation adjustment

(319)

511

Change in cash flow hedges, net of tax

420

64

Change in interest rate cap, net of tax

551

-

Balance at end of period

$(676)

$(396)

     

Shareholders’ equity

$432,861

$439,424


The accompanying notes are an integral part of these condensed consolidated financial statements.



7




OPPENHEIMER HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements    (Unaudited)


1.    Summary of significant accounting policies


Oppenheimer Holdings Inc. (”OPY") is incorporated under the laws of the State of Delaware. On May 11, 2009, the jurisdiction of incorporation of OPY was changed from Canada to Delaware. The consolidated financial statements include the accounts of OPY and its subsidiaries (together, the “Company”). The principal subsidiaries of OPY are Oppenheimer & Co. Inc. ("Oppenheimer"), a registered broker dealer in securities, Oppenheimer Asset Management Inc. (“OAM”) and its wholly owned subsidiary, Oppenheimer Investment Management Inc. (“OIM”), both registered investment advisors under the Investment Advisors Act of 1940, Oppenheimer Trust Company, a limited purpose trust company chartered by the State of New Jersey to provide fiduciary services such as trust and estate administration and investment management, Evanston Financial Corporation (“Evanston”), which is engaged in mortgage brokerage and servicing, OPY Credit Corp., which offers syndication as well as trading of issued corporate loans. Oppenheimer EU Ltd., based in the United Kingdom, provides institutional equities and fixed income brokerage and corporate financial services and is regulated by the Financial Services Authority. Oppenheimer EU Ltd. began operations on September 5, 2008. Oppenheimer Investments Asia Limited, based in Hong Kong, China, provides assistance in accessing the U.S. equities markets and limited mergers and acquisitions advisory services to Asia-based companies.  Oppenheimer operates as Fahnestock & Co. Inc. in Latin America. Oppenheimer owns Freedom Investments, Inc. (“Freedom”), a registered broker dealer in securities, which also operates as the BUYandHOLD division of Freedom, offering on-line discount brokerage and dollar-based investing services and Oppenheimer Israel (OPCO) Ltd., which is engaged in offering investment services in the State of Israel as a local broker dealer.  Oppenheimer holds a trading permit on the New York Stock Exchange and is a member of several other regional exchanges in the United States.


The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These accounting principles are set out in the notes to the Company’s consolidated financial statements for the year ended December 31, 2008 included in its Annual Report on Form 10-K for the year then ended.  


In June 2009, the Company significantly expanded its government trading operations and began financing those operations through the use of securities sold under agreements to repurchase (“repurchase agreements”) and securities purchased under agreements to resell (“reverse repurchase agreements”).  Repurchase and reverse repurchase agreements, principally involving government and agency securities, are carried at amounts at which securities subsequently will be resold or reacquired as specified in the respective agreements and include accrued interest.  Repurchase and reverse repurchase agreements are presented on a net-by-counterparty basis, when the conditions of FASB Interpretation No. 41, “Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements” (“FIN 41”) have been met. FIN 41 permits the offsetting of amounts recognized as payables under repurchase agreements and amounts recognized as receivables under reverse repurchase agreements if the repurchase and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, securities underlying the repurchase and reverse repurchase agreements exist in “book entry” form and certain other requirements are met.


Certain prior period amounts in the condensed consolidated statement of operations have been reclassified to conform with current presentation. Total revenues, total expenses, profit (loss) before income taxes, income tax provision (benefit) and net profit (loss) for the period were not affected.



8




See note 10 for further discussion.


The condensed consolidated financial statements include all adjustments, which in the opinion of management are normal and recurring and necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods presented. The nature of the Company’s business is such that the results of operations for the interim periods are not necessarily indicative of the results to be expected for a full year.


Disclosures reflected in these condensed consolidated financial statements comply in all material respects with those required pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) with respect to quarterly financial reporting.


These condensed consolidated financial statements are presented in U.S. dollars.


New Accounting Pronouncements


Recently Issued

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 ” (“SFAS 166”).  SFAS 166 eliminates the concept of a qualifying special-purpose entity (“QSPE”) and establishes a new “participating interest” definition that must be met for transfers of portions of financial assets to be eligible for sale accounting.  In addition, SFAS 166 provides clarification and amendments to the derecognition criteria for a transfer to be accounted for as a sale and changes the amount of recognized gains or losses on transfers accounted for as a sale when beneficial interests are received by the transferor.  SFAS 166 also has extensive new disclosure requirements for collateral transferred, servicing assets and liabilities, transfers accounted for as sales in securitization and asset-backed financing arrangements when the transferor has continuing involvement with the transferred assets, and transfers of financial assets accounted for as secured borrowings.  The standard will be applied prospectively to new transfers of financial assets occurring in fiscal years beginning after November 15, 2009.  The Company is currently evaluating the impact of adopting SFAS 166 on its financial condition, results of operations, and cash flows.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”).  SFAS 167 amends the consolidation guidance for variable interest entities (“VIE’s) by requiring enterprises to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.  SFAS 167 changes the consideration of “kick-out” rights in determining if an entity is a VIE, which may cause certain additional entities to now be considered VIEs.  In contrast to FIN 46(R), SFAS 167 requires an ongoing reconsideration of the primary beneficiary.  It also amends the events that trigger a reassessment of whether an entity is a VIE.  SFAS 167 expands upon the new disclosures required by FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.”  SFAS 167 is effective as of the first fiscal year that begins after November 15, 2009 with early adoption prohibited.  The transition requirements of SFAS 167 stipulate that assets, liabilities, and noncontrolling interests of the VIE be measured at their carrying amounts as if the statement had been applied from the inception of the VIE with any difference reflected as a cumulative effect adjustment.  The Company is currently evaluating the impact of adopting SFAS 167 on its financial condition, results of operations, and cash flows.



9





Recently Adopted

In December 2007, the FASB issued SFAS No. 141(R), “ Business Combinations” (“SFAS No. 141(R)”). SFAS 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires expensing of most transaction and restructuring costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141(R) applies to all transactions or other events in which the Company obtains control of one or more businesses, including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after December 1, 2008.


In February 2008, the FASB issued FSP FAS No. 140-3, “ Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP No. 140-3”). FSP No. 140-3 requires an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously or in contemplation of the initial transfer to be evaluated as a linked transaction under SFAS No. 140 unless certain criteria are met, including that the transferred asset must be readily obtainable in the marketplace. FSP No. 140-3 is effective for fiscal years beginning after November 15, 2008, and will be applied to transactions entered into after the date of adoption. Early adoption is prohibited. The Company adopted FSP No. 140-3 in the first quarter of 2009 which did not have an impact on its financial condition, results of operations or cash flows.


In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” . FSP No. FAS 140-4 and FIN 46(R)-8 requires enhanced disclosures about transfers of financial assets and interests in variable interest entities. The FSP is effective for interim and annual periods ending after December 15, 2008. Since the FSP requires only additional disclosures concerning transfers of financial assets and interests in variable interest entities, adoption of the FSP did not affect the Company’s financial condition, results of operations or cash flows.


In March 2008, the FASB issued SFAS No. 161, “ Disclosures about Derivative Instruments and Hedging Activities— an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities, and is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early application encouraged. The Company has adopted SFAS No. 161. Since SFAS No. 161 requires only additional disclosures concerning derivatives and hedging activities, adoption of SFAS No. 161 did not affect the Company’s financial condition, results of operations or cash flows.


On October 10, 2008, the FASB issued FSP FAS 157–3, “ Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active ” (“FSP FAS 157–3”). FSP FAS 157–3 clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial instrument when the market for that financial asset is not active. The FSP was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157–3 did not have a material impact on the Company’s financial condition, results of operations or cash flows.



10





On April 9, 2009, the FASB issued FSP FAS No. 157-4, “ Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ” (“FSP FAS 157-4”).  FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, “ Fair Value Measurements ”, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly.  FSP FAS 157-4 is effective for interim reporting periods ending after June 15, 2009.  The adoption of FSP FAS 157-4 did not affect the Company’s financial condition, results of operations or cash flows.


On April 9, 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “ Interim Disclosures about Fair Value of Financial Instruments ”(“FSP FAS 107-1”) which amends FASB Statement No. 107, “ Disclosures about Fair Value of Financial Instruments ”, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, “ Interim Financial Reporting ,” to require those disclosures in summarized financial information at interim reporting periods. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  Since FSP FAS 107-1 requires only additional disclosures about the fair value of financial instruments, the Company’s adoption of FSP FAS 107-1 did not affect the Company’s financial condition, results of operations or cash flows.


In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”).  SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  SFAS 165 is based on the same principles as those that currently exist in auditing standards with the addition of some new terminology.  The standard is effective for interim and annual periods ending after June 15, 2009.  Since SFAS 165 requires only additional disclosure, the Company’s adoption of SFAS 165 did not have an impact on its financial condition, results of operations or cash flows.



3. Earnings per share

Earnings per share was computed by dividing net profit (loss) by the weighted average number of shares of Class A non-voting common stock (“Class A Shares”) and Class B voting common stock (“Class B Shares”) outstanding. Diluted earnings per share includes the weighted average Class A and Class B Shares outstanding and the effects of warrants issued and Class A Shares granted under share-based compensation arrangements using the treasury stock method, if dilutive.




11




Earnings (loss) per share has been calculated as follows:


Amounts are expressed in thousands of dollars, except share and per share amounts


 

Three months ended

June 30,

Six months ended

June 30,

 

2009

2008

2009

2008

Basic weighted average number of shares outstanding


13,069,014


13,508,262


13,070,547


13,567,150

Net dilutive effect of warrants, treasury method (1)


-


-


-


-

Net dilutive effect of share-based awards, treasury method (2)


214,486


140,941


365,162


-

Diluted weighted average number of shares outstanding


13,283,500


13,649,203


13,435,709


13,567,150

         

Net profit (loss) for the period

$7,130

$1,646

$5,116

$(14,468)

         

Basic earnings (loss) per share

$0.55

$0.12

$0.39

$(1.07)

Diluted earnings (loss) per share

$0.54

$0.12

$0.38

$(1.07)

         


(1)

As part of the consideration for the 2008 acquisition of a portion of CIBC World Markets Corp.’s U.S. capital markets businesses, the Company issued a warrant to purchase 1 million Class A Shares of the Company at $48.62 per share exercisable five years from the January 14, 2008 acquisition date. For the three and six months ended June 30, 2009 and 2008, the effect of the warrants is anti-dilutive.


(2)

For the three and six months ended June 30, 2009, respectively, the diluted earnings per share computations do not include the anti-dilutive effect of 542,976 and 557,976 Class A Shares granted under share-based compensation arrangements (357,884 and 1,373,572, respectively, for the three and six months ended June 30, 2008).


During the second quarter of 2009, the Company sustained a one-time charge of approximately $2.0 million in the form of a departure tax payable to the government of Canada in connection with the move of the domicile of the corporation from Canada to the U.S. as well as approximately $1.3 million in professional fees related to this matter totaling $3.3 million on a pre-tax basis ($0.21 per share on an after tax basis), included in other expenses in the condensed consolidated statement of operations. This Canadian departure tax is not deductible for tax purposes which, as a result, negatively impacted the effective tax rate for the three and six month periods ended June 30, 2009.



12






4. Receivable from and payable to brokers and clearing organizations


    Dollar amounts are expressed in thousands.

 

June 30,     2009

 

December 31, 2008

Receivable from brokers and clearing organizations consist of:

     

Deposits paid for securities borrowed

$277,909

 

$192,980

Receivable from brokers

39,292

 

27,517

Securities failed to deliver

27,551

 

17,965

Clearing organizations

20,197

 

14,318

Omnibus accounts

14,249

 

8,233

Other

13,219

 

17,222

 

$392,417

 

$278,235


   
 

June 30,     2009

 

December 31, 2008

Payable to brokers and clearing organizations consist of:

     

Deposits received for securities loaned

$409,368

 

$114,919

Securities failed to receive

27,437

 

31,502

Clearing organizations and other

217

 

13,227

 

$437,022

 

$159,648



5. Financial instruments


Securities owned and securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period.  The Company's other financial instruments are generally short-term in nature or have variable interest rates and as such their carrying values approximate fair value, with the exception of notes receivable from employees which are carried at cost.



13




Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value

Amounts are expressed in thousands of dollars .

 

June 30,

2009

 

December 31,

2008

 

Owned

Sold

 

Owned

Sold

           

U.S. Government, agency and sovereign obligations

   $29,781

   $15,998

 

   $20,751

    $1,212

Corporate debt and other obligations

   32,379

   10,486

 

   23,667

    6,370

Mortgage and other asset-backed securities

     8,025

       235

 

     7,535

        4

Municipal obligations

   54,222

     1,453

 

15,051

       1,024

Convertible bonds

   19,679

     9,070

 

19,730

3,806

Corporate equities

   32,631

   22,069

 

   33,959

14,595

Other

     6,958

       337

 

     6,786

       443

   Total

 $183,675

   $59,648

 

 $127,479

  $27,454


Securities owned and securities sold, but not yet purchased, consist of trading and investment securities at fair values. Included in securities owned at June 30, 2009 are corporate equities with estimated fair values of approximately $11.4 million ($10.7 million at December 31, 2008), which are related to deferred compensation liabilities to certain employees included in accrued compensation on the condensed consolidated balance sheet.


Valuation Techniques

A description of the valuation techniques applied and inputs used in measuring the fair value of the Company’s financial instruments is as follows:


U.S. Government, Agency, & Sovereign Obligations

U.S. Government securities are valued using quoted market prices obtained from active market makers and inter-dealer brokers and, accordingly, are categorized in Level 1 of the fair value hierarchy.  Agency securities primarily consist of mortgage pass-through securities issued by federal agencies and are valued based on quoted market prices when available or by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities and are categorized in Level 1 or 2 of the fair value hierarchy.  The fair value of sovereign obligations is determined based on quoted market prices when available or a valuation model that generally utilizes interest rate yield curves and credit spreads as inputs.  Sovereign obligations are categorized in Level 1 or 2 of the fair value hierarchy.


Corporate Debt & Other Obligations

The fair value of corporate bonds is estimated using recent transactions, broker quotations, and bond spread information. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy.


Mortgage and Other Asset-Backed Securities

The Company holds non-agency securities primarily collateralized by home equity and manufactured housing which are valued based on external pricing and spread data provided by independent pricing services and are generally categorized in Level 2 of the fair value hierarchy.  When position specific external pricing is not observable, the valuation is based on yields and spreads for comparable bonds and, consequently, the positions are categorized in Level 3 of the fair value hierarchy.



14





Municipal Obligations

The fair value of municipal obligations is estimated using recently executed transactions, broker quotations, and bond spread information. These obligations are generally categorized in Level 2 of the fair value hierarchy.


Convertible Bonds

The fair value of convertible bonds is estimated using recently executed transactions and dollar-neutral price quotations, where observable.  When observable price quotations are not available, fair value is determined based on cash flow models using yield curves and bond spreads as key inputs.  Convertible bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where significant inputs are unobservable, they are categorized in Level 3 of the hierarchy.


Corporate Equities

Exchange-traded equity securities and options are generally valued based on quoted prices from the exchange and categorized as Level 1 in the fair value hierarchy.


Other

The Company holds Auction Rate Preferred Securities (“ARPS”) issued by closed-end funds with interest rates that reset through periodic auctions.  Due to the auction mechanism and generally liquid markets, ARPS have historically been categorized as Level 1 in the fair value hierarchy.  Beginning in February 2008, uncertainties in the credit markets resulted in substantially all of the auction rate securities market experiencing failed auctions.  Once the auctions failed, the ARPS could no longer be valued using observable prices set in the auctions.  As a result, the Company has resorted to less observable determinants of the fair value of ARPS, including the strength in the underlying credits, announced issuer redemptions, completed issuer redemptions, and announcements from issuers regarding their intentions with respect to their outstanding auction rate securities. The failure of auctions has resulted in a Level 3 categorization of ARPS in the fair value hierarchy.


Investments

In its role as general partner in certain hedge funds and private equity funds, the Company holds direct investments in such funds.  The Company uses the net asset value of the underlying fund as a basis for estimating the fair value of its investment.  Due to the illiquid nature of these investments and difficulties in obtaining observable inputs, these investments are included in Level 3 of the fair value hierarchy.  


Derivative Contracts

From time to time, the Company transacts in exchange-traded and over-the-counter derivative transactions to manage its interest rate risk.   Exchange-traded derivatives, namely U.S. Treasury futures, are valued based on quoted prices from the exchange and are categorized as Level 1 of the fair value hierarchy.  Over-the-counter derivatives, namely interest rate swap and interest rate cap contracts, are valued using a discounted cash flow model and the Black-Scholes model, respectively, using observable interest rate inputs and are categorized in Level 2 of the fair value hierarchy.


As described below in “Credit Concentrations”, the Company participates in loan syndications and operates as underwriting agent in leveraged financing transactions where it utilizes a warehouse facility provided by Canadian Imperial Bank of Commerce (“CIBC”) to extend financing commitments to third-party borrowers identified by the Company.  The Company uses broker quotations on loans trading in the secondary market as a proxy to determine the fair value of the underlying loan commitment which is categorized in Level 3 of the fair value hierarchy.  The



15




Company also purchases and sells loans in its proprietary trading book where CIBC provides the financing through a loan trading facility.  The Company uses broker quotations to determine the fair value of loan positions held which are categorized in Level 2 of the fair value hierarchy.  

Fair Value Measurements

The Company’s assets and liabilities, recorded at fair value on a recurring basis as of June 30, 2009 and December 31, 2008, have been categorized based upon the above fair value hierarchy as follows:


Assets and liabilities measured at fair value on a recurring basis as of June 30, 2009.


Amounts are expressed in thousands of dollars.

 

Fair Value Measurements

 

As of June 30, 2009

 

Level 1

Level 2

Level 3

Total

         

Assets:

       

Cash equivalents

$4,992

$-

$-

$4,992

Securities segregated for regulatory and other purposes


23,158


-


-


23,158

Deposits with clearing organizations

7,994

-

-

7,994

Securities owned:

       

   U.S. Government, agency and sovereign

       

   obligations

21,902

7,879

-

29,781

   Corporate debt and other obligations

-

32,379

-

32,379

   Mortgage and other asset-backed securities

-

5,906

2,119

8,025

   Municipal obligations

-

54,222

-

54,222

   Convertible bonds

-

19,679

-

19,679

   Corporate equities

29,487

3,144

-

32,631

   Other

1,633

-

5,325

6,958

Securities owned, at fair value

53,022

123,209

7,444

183,675

Investments (1)

260

25,816

13,782

39,858

Derivative contracts (2)

-

3,291

-

3,291

Total

$89,426

$152,316

$21,226

$262,968



Liabilities:

       

Securities sold, but not yet purchased:

       

   U.S. Government, agency and sovereign

       

   obligations

$15,946

$52

$-

$15,998

   Corporate debt and other obligations

-

10,486

-

10,486

   Mortgage and other asset-backed securities

-

25

210

235

   Municipal obligations

-

1,453

-

1,453

   Convertible bonds

-

9,070

-

9,070

   Corporate equities

15,575

6,494

-

22,069

   Other

12

-

325

337

Securities sold, but not yet purchased

31,533

27,580

535

59,648

Derivative contracts (3)

32

1,725

-

1,757

Total

$31,565

$29,305

$535

$61,405

         



16





(1) Included in other assets on the condensed consolidated balance sheet.

(2) Included in receivable from brokers and clearing organizations on the condensed consolidated balance sheet.

(3) Included in payables to brokers and clearing organizations on condensed consolidated balance sheet


Assets and liabilities measured at fair value on a recurring basis as of December 31, 2008.


Amounts are expressed in thousands of dollars.

 

Fair Value Measurement

 

As of December 31, 2008

 

Level 1

Level 2

Level 3

Total

Assets:

       

Cash equivalents

$        8,627

$             -

$             -

$        8,627

Securities segregated for regulatory and other purposes


11,499


-


-


11,499

Deposits with clearing organizations

8,295

-

-

8,295

Securities owned:

       

   U.S. Government, agency and

       

   sovereign obligations

17,738

3,013

-

20,751

   Corporate debt and other obligations

-

23,667

-

23,667

   Mortgage and other asset-backed

       

   securities

-

5,925

1,610

7,535

   Municipal obligations

-

15,051

-

15,051

   Convertible bonds

-

18,915

815

19,730

   Corporate equities

33,959

-

-

33,959

   Other

1,461

-

5,325

6,786

Securities owned, at fair value

53,158

66,571

7,750

127,479

Investments (1)

597

19,121

12,085

31,803

Derivative contracts (2)

-

71

-

71

Total

$      82,176

$   85,763

$   19,835

$    187,774

   


Liabilities:

       

Securities sold, but not yet purchased:

       

   U.S. Government, agency and

       

   sovereign obligations

$        1,212

$             -

$             -

$        1,212

   Corporate debt and other obligations

-

6,370

-

6,370

   Mortgage and other asset-backed

       

   securities

-

4

-

4

   Municipal obligations

-

1,024

-

1,024

   Convertible bonds

-

3,806

-

3,806

   Corporate equities

14,595

-

-

14,595

   Other

68

-

375

443

Securities sold, but not yet purchased, at fair value


15,875


11,204


375


27,454

Derivative contracts (3)

341

2,373

2,516

5,230

Total

$      16,216

$   13,577

$     2,891

$      32,684

         



17





(1) Included in other assets on the condensed consolidated balance sheet.

(2) Included in receivable from brokers and clearing organizations on the condensed consolidated balance sheet.

(3) Included in payable to brokers and clearing organizations (Levels 1 and 2) and accounts payable and other liabilities (Level 3) on the condensed consolidated balance sheet.



The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ending June 30, 2009 and 2008.


Amounts are expressed in thousands of dollars.

 

Level 3 Assets and Liabilities

 

For the three months ended June 30, 2009

 



Opening Balance


Realized Gains (Losses) (5)


Unrealized Gains (Losses) (5)

Purchases, Sales, Issuances, Settlements



Transfers In / Out



Ending Balance

Assets:

           

Mortgage and other asset-backed

securities (1)



$2,497



67



-



(445)



-



$2,119

Other(2)

5,325

-

-

-

-

5,325

Investments (3)

12,031

-

1,500

251

-

13,782

             

Liabilities:

           

Mortgage and other asset-backed

securities (1)



$-



-



(5)



(205)



-



$(210)

Other (2)

(375)

-

-

50

-

(325)

Derivative contracts (4)

(45)

-

-

45

-

-


(1) Represents non-agency securities primarily collateralized by home equity and manufactured housing.

(2) Represents auction rate preferred securities that failed in the auction rate market. Fair value approximates par due to strength in the underlying credits and the recent trend in issuer redemptions.

(3) Primarily represents general partner ownership interests in hedge funds and private equity funds sponsored by the Company.

(4) Represents unrealized losses on excess retention exposure on leveraged finance underwriting activity, described below under Credit Concentrations.

(5) Included in principal transactions, net on the condensed consolidated statement of operations, except for investments which is included in other income on the condensed consolidated statement of operations.




18





Amounts are expressed in thousands of dollars.

 

Level 3 Assets and Liabilities

 

For the six months ended June 30, 2009

 



Opening Balance


Realized Gains (Losses) (5)


Unrealized Gains (Losses) (5)

Purchases, Sales, Issuances, Settlements



Transfers In / Out



Ending Balance

Assets:

           

Convertible bonds

$815

(124)

-

(691)

-

$-

Mortgage and other asset-backed

securities (1)



1,610



(34)



(1)



592



(48)



2,119

Other(2)

5,325

-

-

-

-

5,325

Investments (3)

12,087

-

1,357

338

-

13,782

             

Liabilities:

           

Mortgage and other asset-backed

securities (1)



$-



-



(5)



(205)



-



$(210)

Other (2)

(375)

-

-

50

-

(325)

Derivative contracts (4)

(2,516)

-

-

2,516

-

-


(1) Represents non-agency securities primarily collateralized by home equity and manufactured housing.

(2) Represents auction rate preferred securities that failed in the auction rate market. Fair value approximates par due to strength in the underlying credits and the recent trend in issuer redemptions.

(3) Primarily represents general partner ownership interests in hedge funds and private equity funds sponsored by the Company.

(4) Represents unrealized losses on excess retention exposure on leveraged finance underwriting activity, described below under Credit Concentrations.  

(5) Included in principal transactions, net on the condensed consolidated statement of operations, except for investments which is included in other income on the condensed consolidated statement of operations.



19





Amounts are expressed in thousands of dollars.

 

Level 3 Assets and Liabilities

 

For the three months ended June 30, 2008

 



Opening Balance


Realized Gains (Losses)

(4)


Unrealized Gains (Losses) (4)

Purchases, Sales, Issuances, Settlements



Transfers In / Out



Ending Balance

Assets:

           

Corporate debt and other obligations


$122


-


-


(122)


-


$-

Mortgage and other asset-backed securities (1)



1,971



8



(294)



93



(680)



1,098

Other (2)

5,622

-

-

(250)

(22)

5,350

Investments (3)

2,067

-

-

139

-

2,206

             

Liabilities:

           

Other (2)

$(650)

-

-

275

-

$(375)

             

(1) Primarily represents bonds issued by private pass through trusts backed by residential mortgage-backed securities.

(2) Represents auction rate preferred securities that failed in the auction rate market. Fair value approximates par due to strength in the underlying credits and the recent trend in issuer redemptions.

(3) Primarily represents general partner ownership interests in private equity funds sponsored by the Company.

(4) Included in principal transactions, net on the condensed consolidated statement of operations, except for investments which is included in other income on the condensed consolidated statement of operations.




20





Amounts are expressed in thousands of dollars.

 

Level 3 Assets and Liabilities

 

For the six months ended June 30, 2008

 



Opening Balance


Realized Gains (Losses)

(4)


Unrealized Gains (Losses) (4)

Purchases, Sales, Issuances, Settlements



Transfers In / Out



Ending Balance

Assets:

           

Mortgage and other asset-backed securities (1)



$881



8



(347)



628



(72)



$1,098

Other (2)

-

-

-

5,372

(22)

5,350

Investments (3)

1,820

42

-

344

-

2,206

             

Liabilities:

           

Other (2)

$-

-

-

275

(650)

$(375)

             

(1) Primarily represents bonds issued by private pass through trusts backed by residential mortgage-backed securities.

(2) Represents auction rate preferred securities that failed in the auction rate market. Fair value approximates par due to strength in the underlying credits and the recent trend in issuer redemptions.

(3) Primarily represents general partner ownership interests in private equity funds sponsored by the Company.

(4) Included in principal transactions, net on the condensed consolidated statement of operations, except for investments which is included in other income on the condensed consolidated statement of operations.



Fair Value Option

The Company adopted the provisions of SFAS 159 effective January 1, 2008.  SFAS 159 provides entities the option to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. SFAS 159 permits the fair value option election on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The Company has elected to apply the fair value option to its loan trading portfolio which resides in the newly formed entity, OPY Credit Corp.  Management has elected this treatment as it is consistent with the manner in which the business is managed as well as the way that financial instruments in other parts of the business are recorded.  There was one loan position held in the secondary loan trading portfolio at June 30, 2009 with a par value of $950,000 (nil in 2008) and a fair value of $888,000 which is categorized in Level 2 of the fair value hierarchy.


Fair Value of Derivative Instruments

The Company adopted the provisions of SFAS 161 effective January 1, 2009.  SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities.  The Company transacts, on a limited basis, in exchange traded and over-the-counter derivatives for both asset and liability management as well as for trading and investment purposes.  Risks managed using derivative instruments include interest rate risk and, to a lesser extent, foreign exchange risk.  Interest rate



21




swaps and interest rate caps are entered into to manage the Company’s interest rate risk associated with floating-rate borrowings.  Statement of Financial Accounting Standards No. 133, “ Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet.  In accordance with SFAS 133, the Company designates interest rate swaps and interest rate caps as cash flow hedges of floating-rate borrowings.


Cash flow hedges used for asset and liability management

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.  Gains or losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.


On September 29, 2006, the Company entered into interest rate swap transactions to hedge the interest payments associated with its floating rate Senior Secured Credit Note, which is subject to change due to changes in 3-Month LIBOR. See Note 6 for further information. These swaps have been designated as cash flow hedges under SFAS 133.  Changes in the fair value of the swap hedges are expected to be highly effective in offsetting changes in the interest payments due to changes in 3-Month LIBOR. For the three and six months ended June 30, 2009, the effective portion of the net gain on the interest rate swaps, net of tax, was approximately $170,000 and $420,000, respectively, and has been recorded as other comprehensive income on the condensed consolidated statement of comprehensive income (loss).  There was no ineffective portion as at June 30, 2009. The interest rate swaps had a weighted-average fixed interest rate of 5.45% and a weighted-average maturity of 1 year at June 30, 2009.


On January 20, 2009, the Company entered into an interest rate cap contract, incorporating a series of purchased caplets with fixed maturity dates ending December 31, 2012, to hedge the interest payments associated with its floating rate Subordinated Note, which is subject to changes in 3-Month LIBOR.  See Note 6 for further information.  This cap has been designated as a cash flow hedge under SFAS 133.  Changes in the fair value of the interest rate cap are expected to be highly effective in offsetting changes in the interest payments due to changes in 3-Month LIBOR. For the three and six months ended June 30, 2009, the effective portion of the net gain on the interest rate cap, net of tax, was approximately $932,000 and $551,000, respectively, and has been recorded as other comprehensive income on the condensed consolidated statement of comprehensive income (loss).  There was no ineffective portion as at June 30, 2009. The Company paid a premium for the interest rate cap of $2.4 million which has a strike of 2% and matures December 31, 2012.  


Foreign exchange hedges

The Company also utilizes forward and options contracts to hedge the foreign currency risk associated with compensation obligations to Oppenheimer Israel (OPCO) Ltd. employees denominated in New Israeli Shekels.  


Derivatives used for trading and investment purposes

Futures contracts represent commitments to purchase or sell securities or other commodities at a future date and at a specified price. Market risk exists with respect to these instruments. Notional or contractual amounts are used to express the volume of these transactions, and do not represent the amounts potentially subject to market risk. At June 30, 2009, the Company had no open contracts.



22





The Company has some limited trading activities in pass-through mortgage-backed securities eligible to be sold in the "to-be-announced" or TBA market.  TBAs provide for the forward or delayed delivery of the underlying instrument with settlement up to 180 days. The contractual or notional amounts related to these financial instruments reflect the volume of activity and do not reflect the amounts at risk. Unrealized gains and losses on TBAs are recorded in the condensed consolidated balance sheets in receivable from brokers and clearing organizations and payable to brokers and clearing organizations, respectively, and in the condensed consolidated statement of operations as principal transactions revenue.  See Fair Value of Derivative Instruments tables below for TBA’s outstanding at June 30, 2009.


The notional amounts and fair values of the Company’s derivatives at June 30, 2009 by product were as follows:


Dollar amounts are expressed in thousands.

 

Fair Value of Derivative Instruments

 

As of June 30, 2009

 

Type

Balance Sheet Location

Notional

Fair Value


Assets:

       

Derivatives designated as hedging instruments under SFAS 133:

       

Interest rate contracts

Caps

Receivable from brokers and clearing organizations



$100,000



$3,291

Derivatives not designated as hedging instruments under SFAS 133:

       

Foreign exchange contracts

Options

Other assets

$400

$-


Total assets

   


$100,400


$3,291



Liabilities:

       

Derivatives designated as hedging instruments under SFAS 133:

       

Interest rate contracts

Swaps

Payable to brokers and clearing organizations


$36,000


$1,616

Derivatives not designated as hedging instruments under SFAS 133:

       

Foreign exchange contracts

Forwards

Accounts payable and other liabilities


$800


$32

Other contracts

TBA's

Payable to brokers and clearing organizations


2,500


109

     

3,300

141


Total liabilities

   


$39,300


$1,757



23





The following table presents the location and fair value amounts of the Company’s derivative instruments and their effect on the statement of operations for the three months ended June 30, 2009.


   

Recognized in Income on Derivatives

Recognized in OCI on Derivatives (Effective Portion)

Reclassified from Accumulated OCI into Income (Effective Portion) (2)

SFAS 133 Hedging Relationship:

Type

Location

Gain/ (Loss)

Gain/

(Loss)

Location

Gain/ (Loss)

Cash Flow Hedges:

Interest rate contracts

Swaps

N/A

 $         -

 $          170

Interest

Expense

 $   (385)  -

 

Caps

N/A

           -

932

None

             -

             

Derivatives used for trading and investment:

Commodity contracts

U.S Treasury Futures

Principal transaction revenue

         2,339

                  -

None

             -

Foreign exchange contracts

Forwards

Other revenue

(32)

-

None

             -

 

Options

Other revenue

-

-

None

             -

Other contracts

TBA's

Principal transaction revenue

           -

                  -

None

             -

             

Credit-Risk Related Contingent Features:

       

Warehouse facility

Excess retention (1)

Principal transaction revenue

-

-

None

             -

Total

   

 $   2,307

 $    1,102

 

 $   (385)

(1) See “Credit Concentrations” section below for description of derivative financial instruments.

(2) There is no ineffective portion included in income for the three and six months ended June 30, 2009.



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The following table presents the location and fair value amounts of the Company’s derivative instruments and their effect on the statement of operations for the six months ended June 30, 2009.


   

Recognized in Income on Derivatives

Recognized in OCI on Derivatives (Effective Portion)

Reclassified from Accumulated OCI into Income (Effective Portion) (2)

SFAS 133 Hedging Relationship:

Type

Location

Gain/ (Loss)

Gain/

(Loss)

Location

Gain/ (Loss)

Cash Flow Hedges:

Interest rate contracts

Swaps

N/A

 $         -

 $          420

Interest

Expense

 $   (853)  -

 

Caps

N/A

           -

551

None

             -

             

Derivatives used for trading and investment:

Commodity contracts

U.S Treasury Futures

Principal transaction revenue

         2,417

                  -

None

             -

Foreign exchange contracts

Forwards

Other revenue

(32)

-

None

             -

 

Options

Other revenue

-

-

None

             -

Other contracts

TBA's

Principal transaction revenue

           -

                  -

None

             -

             

Credit-Risk Related Contingent Features:

       

Warehouse facility

Excess retention (1)

Principal transaction revenue

47

-

None

             -

Total

   

 $   2,432

 $       971

 

 $   (853)

(1) See “Credit Concentrations” section below for description of derivative financial instruments.

(2) There is no ineffective portion included in income for the three and six months ended June 30, 2009.


Collateralized Transactions

The Company enters into collateralized borrowing and lending transactions in order to meet customers’ needs and earn residual interest rate spreads, obtain securities for settlement and finance trading inventory positions. Under these transactions, the Company either receives or provides collateral, including U.S. government and agency, asset-backed, corporate debt, equity, and non-U.S. government and agency securities.  


The Company receives collateral in connection with securities borrowed and reverse repurchase agreement transactions, and customer margin loans. Under many agreements, the Company is permitted to sell or repledge the securities received (e.g., use the securities to enter into securities lending transactions, or deliver to counterparties to cover short positions).  At June 30, 2009, the fair value of securities received as collateral under securities borrowed transactions and reverse



25




repurchase agreements was $266.5 million and $161.7 million, respectively, of which the Company has re-pledged approximately $128.5 million under securities loaned transactions and $149.7 million under repurchase agreements.


The Company pledges certain of its securities owned for securities lending, repurchase agreements, and to collateralize bank call loan transactions.  The carrying value of pledged securities owned that can be sold or re-pledged by the counterparty was $3.6 million as at June 30, 2009 ($1.9 million at December 31, 2008). The carrying value of securities owned by the Company that have been loaned or pledged to counterparties where those counterparties do not have the right to sell or re-pledge the collateral was $76.3 million as at June 30, 2009. 


The Company manages credit exposure arising from repurchase and reverse repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate and the right to offset a counterparty’s rights and obligations.  The Company also monitors the market value of collateral held and the market value of securities receivable from others. It is the Company's policy to request and obtain additional collateral when exposure to loss exists. In the event the counterparty is unable to meet its contractual obligation to return the securities, the Company may be exposed to off-balance sheet risk of acquiring securities at prevailing market prices. One of the Company's funds in which it acts as a general partner and also owns a limited partnership interest, utilized Lehman Brothers International (Europe) as a prime broker.  As of June 30, 2009, Lehman Brothers International (Europe) held securities with a fair value of $6.1 million that were segregated and not re-hypothecated.


At June 30, 2009, the Company had available collateralized and uncollateralized letters of credit of $147.2 million.


Credit Concentrations

Credit concentrations may arise from trading, investing, underwriting and financing activities and may be impacted by changes in economic, industry or political factors.  In the normal course of business, the Company may be exposed to risk in the event customers, counterparties including other brokers and dealers, issuers, banks, depositories or clearing organizations are unable to fulfill their contractual obligations.  The Company seeks to mitigate these risks by actively monitoring exposures and obtaining collateral as deemed appropriate.  Included in receivable from brokers and clearing organizations as of June 30, 2009 are receivables from three major U.S. broker-dealers totaling approximately $153.3 million.


The Company participates in Loan Syndications through its Debt Capital Markets business.  Through OPY Credit Corp., the Company operates as underwriting agent in leveraged financing transactions where it utilizes a warehouse facility provided by CIBC to extend financing commitments to third-party borrowers identified by the Company. The Company has exposure, up to a maximum of 10%, of the excess underwriting commitment provided by CIBC over CIBC’s targeted loan retention (defined as “Excess Retention”). The Company quantifies its Excess Retention exposure by assigning a fair value to the underlying loan commitment provided by CIBC (in excess of what CIBC has agreed to retain) which is based on the fair value of the loans trading in the secondary market.  To the extent that the fair value of the loans has decreased, the Company records an unrealized loss on the Excess Retention. Underwriting of loans pursuant to the warehouse facility is subject to joint credit approval by the Company and CIBC.  The maximum aggregate principal amount of the warehouse facility is $1.5 billion, of which the Company utilized $74.4 million and had nil in Excess Retention as of June 30, 2009.  



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The Company is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Company. Clients are required to complete their transactions on settlement date, generally one to three business days after trade date. If clients do not fulfill their contractual obligations, the Company may incur losses. The Company has clearing/participating arrangements with the National Association of Securities Dealers (“NSCC”), the Fixed Income Clearing Corporation (“FICC”), R.J. O’Brien & Associates (commodities transactions) and others.  The clearing brokers have the right to charge the Company for losses that result from a client's failure to fulfill its contractual obligations. Accordingly, the Company has credit exposures with these clearing brokers. The clearing brokers can re-hypothecate the securities held on behalf of the Company. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing brokers, the Company believes there is no maximum amount assignable to this right. At June 30, 2009, the Company had recorded no liabilities with regard to this right. The Company's policy is to monitor the credit standing of the clearing brokers and banks with which it conducts business.


Variable Interest Entities (VIEs)

FASB Interpretation No. 46, as revised (“FIN 46R”), “ Consolidation of Variable Interest Entities” , applies to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The primary beneficiary of a VIE is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests.  


The Company serves as general partner of private equity funds that were established for the purpose of providing investment alternatives to both its institutional and qualified retail clients.  The Company holds variable interests in these funds as a result of its rights to receive management and incentive fees. The Company’s investment in and additional capital commitments to these private equity funds are also considered variable interests. The Company's additional capital commitments are limited in amount and subject to call at a later date.


The Company assesses whether it is the primary beneficiary of the private equity funds in which it holds a variable interest in the context of the total general ($1.6 million) and limited partner ($130.6 million) interests held in these funds by all parties. In each instance the Company has determined that it is not the primary beneficiary and therefore need not consolidate the private equity fund. The Company’s general partnership interests ($1.6 million at June 30, 2009) represent its maximum exposure to loss and are included in other assets on the condensed consolidated balance sheet.  In addition, the Company has additional capital commitments to these funds of $1.3 million at June 30, 2009 (for further information see note 13 “Commitments and Contingencies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).

 



27




6. Long-term debt


Dollar amounts are expressed in thousands.


Issued


Maturity Date

Interest Rate at June 30, 2009

June 30, 2009

December 31, 2008

         

Senior Secured Credit Note (a)

7/31/2013

5.72%

$37,303

$47,663

         

Subordinated Note (b)

1/31/2014

6.46%

$100,000

$100,000


(a) In 2006, the Company issued a Senior Secured Credit Note in the amount of $125.0 million at a variable interest rate based on LIBOR with a seven-year term to a syndicate led by Morgan Stanley Senior Funding Inc., as agent.  In accordance with the Senior Secured Credit Note, the Company has provided certain covenants to the lenders with respect to the maintenance of a minimum fixed charge ratio and maximum leverage ratio and minimum net capital requirements with respect to Oppenheimer.


On December 22, 2008, certain terms of the Senior Secured Credit Note were amended, including (1) revised financial covenant levels that require that (i) the Company maintain a maximum leverage ratio (total long-term debt divided by EBITDA) of 4.45 at June 30, 2009 and (ii) the Company maintain a minimum fixed charge ratio (EBITDA adjusted for capital expenditures and income taxes divided by the sum of principal and interest payments on long-term debt) of 1.70 at June 30, 2009; (2) an increase in scheduled principal payments as follows: 2009 - $400,000 per quarter plus $4.0 million on September 30, 2009, and 2010 - $500,000 per quarter plus $8.0 million on September 30, 2010; (3) an increase in the interest rate to LIBOR plus 450 basis points (an increase of 150 basis points); and (4) a pay-down of principal equal to the cost of any share repurchases made pursuant to the Normal Course Issuer Bid. In the Company’s view, the maximum leverage ratio and minimum fixed charge ratio represent the most restrictive covenants.  At June 30, 2009, the Company was in compliance with all of its covenants.


The effective interest rate on the Senior Secured Credit Note for the three months ended June 30, 2009 was 5.72%. Interest expense, as well as interest paid on a cash basis for the three and six months ended June 30, 2009 on the Senior Secured Credit Note was $545,200 and $1.3 million, respectively ($1.3 million and $3.0 million, respectively for the three and six months ended June 30, 2008). On June 30, 2009, the Company made a scheduled repayment of principal in the amount of $400,000 bringing the outstanding balance to $37.3 million. Of the $37.3 million principal amount outstanding at June 30, 2009, $5.8 million of principal is expected to be paid within 12 months.


The obligations under the Senior Secured Credit Note are guaranteed by certain of the Company’s subsidiaries, other than broker-dealer subsidiaries, with certain exceptions, and are collateralized by a lien on substantially all of the assets of each guarantor, including a pledge of the ownership interests in each first-tier broker-dealer subsidiary held by a guarantor, with certain exceptions.


(b) On January 14, 2008, in connection with the acquisition of certain capital markets businesses from CIBC (the “New Capital Markets Business”), CIBC made a loan in the amount of $100.0 million and the Company issued a Subordinated Note to CIBC in the amount of $100.0 million at a variable interest rate based on LIBOR. The Subordinated Note is due and payable on



28




January 31, 2014 with interest payable on a quarterly basis. The purpose of this note is to support the capital requirements of the New Capital Markets Business.  In accordance with the Subordinated Note, the Company has provided certain covenants to CIBC with respect to the maintenance of a minimum fixed charge ratio and maximum leverage ratio and minimum net capital requirements with respect to Oppenheimer.  


Effective December 23, 2008, certain terms of the Subordinated Note were amended, including (1) revised financial covenant levels that require that (i) the Company maintain a maximum leverage ratio of 5.25 at June 30, 2009 and (ii) the Company maintain a minimum fixed charge ratio of 1.40 at June 30, 2009; and (2) an increase in the interest rate to LIBOR plus 525 basis points (an increase of 150 basis points).  In the Company’s view, the maximum leverage ratio and minimum fixed charge ratio represent the most restrictive covenants.  At June 30, 2009, the Company was in compliance with all of its covenants.


The effective interest rate on the Subordinated Note for the three months ended June 30, 2009 was 6.46%. Interest expense, as well as interest paid on a cash basis for the three and six months ended June 30, 2009, on the Subordinated Note was $1.6 million and $3.3 million, respectively ($1.6 million and $3.2 million, respectively, for the three and six months ended June 30, 2008).


7. Share capital


The following table reflects changes in the number of Class A Shares outstanding for the periods indicated:

 

Three months ended

June 30,

Six months ended

June 30,

 

2009

2008

2009

2008

Class A Shares outstanding, beginning of period


12,968,992


13,513,608


12,899,465


13,266,596

Issued pursuant to the share-based compensation plans


2,075


35,782


121,602


282,794

Repurchased and cancelled pursuant to the issuer bid


-


(308,976)


(50,000)


(308,976)

Class A Shares outstanding, end of period


12,971,067


13,240,414


12,971,067


13,240,414



8. Net capital requirements


The Company's broker dealer subsidiaries, Oppenheimer and Freedom, are subject to the uniform net capital requirements of the SEC under Rule 15c3-1 (the “Rule”). Oppenheimer computes its net capital requirements under the alternative method provided for in the Rule which requires that Oppenheimer maintain net capital equal to two percent of aggregate customer-related debit items, as defined in SEC Rule 15c3-3. At June 30, 2009, the net capital of Oppenheimer as calculated under the Rule was $178.9 million or 19.2% of Oppenheimer's aggregate debit items. This was $160.3 million in excess of the minimum required net capital at that date. Freedom computes its net capital requirement under the basic method provided for in the Rule, which requires that Freedom maintain net capital equal to the greater of $250,000 or 6 2/3% of aggregate indebtedness, as defined. At June 30, 2009, Freedom had net capital of $4.6 million, which was $4.3 million in excess of the $250,000 required to be maintained at that date.



29





At June 30, 2009, the regulatory capital of Oppenheimer EU Limited was $1.7 million which was $134,000 in excess of the $1.6 million required to be maintained at that date. Oppenheimer EU Limited computes its regulatory capital pursuant to the Fixed Overhead Method prescribed by the Financial Services Authority of the United Kingdom.


9. Related party transactions


The Company does not make loans to its officers and directors except under normal commercial terms pursuant to client margin account agreements. These loans are fully collateralized by such employee-owned securities.


10. Prior period items


Certain prior period amounts in the condensed consolidated statement of operations have been reclassified to conform with the current presentation.


The following table identifies the revenue amounts as reported originally and as reclassified.


 

Three months ended

June 30, 2008

Six months ended            June 30, 2008

 

As reported

Reclassified

As reported

Reclassified

Expressed in thousands of dollars

       

REVENUE:

       

  Commissions

$119,390

$126,530

$243,938

$257,838

  Investment banking

$43,488

$36,348

$66,451

$52,551


The change reflects a reclassification of gross credits derived from secondary trading in municipal securities from investment banking to commissions.  Gross credits related to municipal securities where the Company participates in the syndicate continue to be classified as part of investment banking.


The Company identified certain under/over accruals in communications and technology expenses relating to prior periods which the Company has adjusted in the current period.  These out-of-period adjustments, which were not significant to any prior period, resulted in a decrease of communication and technology expenses of $955,000 and $147,000 for the three and six months ended June 30, 2009, respectively.


11. Goodwill


The Company determines the fair value of each of its reporting units and the fair value of the reporting unit’s goodwill under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Goodwill arose upon the acquisitions of Oppenheimer, Old Michigan Corp., Josephthal & Co. Inc., Grand Charter Group Incorporated and the Oppenheimer Divisions. The Company defines a reporting unit as an operating segment. The Company’s goodwill resides in its Private Client Division (“PCD”). Goodwill of a reporting unit is subject to at least an annual test for impairment to determine if the fair value of goodwill of a reporting unit is less than its estimated carrying amount. The Company derives the estimated carrying amount of its operating



30




segments by estimating the amount of shareholders’ equity required to support the activities of each operating segment.


SFAS 142 requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.   As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company performed an impairment analysis between annual tests as of September 30, 2008 due to the significant discount between the Company’s market capitalization and its book value at that time.  The Company also performed its annual test for goodwill impairment as of December 31, 2008. Neither of the impairment analyses resulted in impairment charges. Despite a significant rebound in the market capitalization during the six-month period ended June 30, 2009, the market capitalization was still trading at a discount to book value and, as a result, the Company performed an interim goodwill impairment analysis as of June 30, 2009.


The Company’s goodwill impairment analysis performed at June 30, 2009 applied the same valuation methodologies with consistent inputs as that performed at December 31, 2008 (see Note 15 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).  Based on the analysis performed, the Company concluded that the PCD’s fair value exceeded its carrying amount including goodwill as of June 30, 2009. Despite the difficult operating environment over the past year, the PCD operating segment continued to produce strong revenues, cash flows, and earnings in the trailing-twelve-month period ended June 30, 2009, reflective of the Company’s strong franchise and the attractive economics of the underlying transaction and fee-based revenues in the private wealth management business.



31





12. Segment information



32





The table below presents information about the reported revenue and profit (loss) before income taxes of the Company for the periods noted. The Company’s segments are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company’s business is conducted primarily in the United States with additional operations in the United Kingdom, Israel, Hong Kong, and Latin America.   Asset information by reportable segment is not reported, since the Company does not produce such information for internal use.



33






Amounts are expressed in thousands of dollars.

 

Three months ended       June 30,

Six months ended         June 30,

 

2009

2008

2009

2008

Revenue:

       

Private Client

$133,123

$143,395

$248,051

$289,892

Capital Markets

101,544

90,620

177,721

157,280

Asset Management

12,659

16,067

23,914

33,588

Other

3,398

6,159

6,303

7,356

Total

$250,724

$256,241

$455,989

$488,116


Profit (loss) before income taxes:

       

Private Client

$3,467

$19,303

$5,969

$31,542

Capital Markets

4,905

(18,167)

(710)

(57,293)

Asset Management

2,911

3,168

3,693

6,107

Other

1,693

(2,119)

1,202

(4,959)

Total

$12,976

$2,185

$10,154

$(24,603)



13. Subsequent events



34





On July 30, 2009, the Company announced a cash dividend of U.S. $0.11 per share (totaling $1.4 million) payable on August 28, 2009 to Class A and Class B shareholders of record on August 14, 2009.


The Company has performed an evaluation of subsequent events through August 6, 2009, the filing date of this Quarterly Report on Form 10-Q.



35




Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations  


The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Reference is also made to the Company’s consolidated financial statements and notes thereto found in its Annual Report on Form 10-K for the year ended December 31, 2008.

Oppenheimer Holdings Inc. (the Company”) engages in a broad range of activities in the securities industry, including retail securities brokerage, institutional sales and trading, investment banking (both corporate and public), research, market-making, securities lending activities, trust services and investment advisory and asset management services. Its principal subsidiaries are Oppenheimer & Co. Inc. (“Oppenheimer”)  and Oppenheimer Asset Management (“OAM”). As at June 30, 2009, the Company provided its services from 94 offices in 26 states located throughout the United States, offices in Tel Aviv, Israel, Hong Kong, China, and London, England and in two offices in Latin America through local broker-dealers. Client assets entrusted to the Company as at June 30, 2009 totaled approximately $55.3 billion. The Company provides investment advisory services through OAM and Oppenheimer Investment Management (“OIM”) and Oppenheimer’s Fahnestock Asset Management and OMEGA Group divisions. The Company provides trust services and products through Oppenheimer Trust Company. The Company provides discount brokerage services through Freedom and through BUYandHOLD, a division of Freedom Investments, Inc. Through OPY Credit Corp., the Company offers syndication as well as trading of issued corporate loans. Evanston Financial Corporation is engaged in mortgage brokerage and servicing. At June 30, 2009, client assets under management by the asset management groups totaled $13.6 billion.  At June 30, 2009, the Company employed 3,619 employees (3,542 full time and 77 part time), of whom approximately 1,843 were registered personnel, including approximately 1,490 financial advisers.


Critical Accounting Policies


The Company’s accounting policies are essential to understanding and interpreting the financial results reported in the condensed consolidated financial statements. The significant accounting policies used in the preparation of the Company’s condensed consolidated financial statements are summarized in notes 1 and 2 to the Company’s condensed consolidated financial statements and notes thereto found in its Annual Report on Form 10-K for the year ended December 31, 2008. Certain of those policies are considered to be particularly important to the presentation of the Company’s financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.


During the three months ended June 30, 2009, there were no material changes to matters discussed under the heading “Critical Accounting Policies” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.


Business Environment


The securities industry is directly affected by general economic and market conditions, including fluctuations in volume and price levels of securities and changes in interest rates, inflation, political events, investor participation levels, legal and regulatory, accounting, tax and compliance requirements and competition, all of which have an impact on commissions, firm trading, fees from accounts under investment management as well as fees for investment banking services, and investment income as well as on liquidity. Substantial fluctuations can occur in revenues and net income due to these and other factors.



36





The U.S economy may be starting to emerge from the most severe recession in the last 50 years, although unemployment numbers continue to grow. Historic levels of government spending and actions taken to stabilize the financial sector appear likely to result in increased economic activity over the next several quarters and also begin to limit further erosion in the valuation of housing and other real estate. Improvements in consumer confidence should continue over the balance of the year and that should begin to moderate market volatility and lead to further improvement in market conditions.


Interest rate changes impact the Company’s fixed income businesses as well as its cost of borrowed funds. As a result of the Federal Reserve’s reductions in the Federal Funds target rate, average interest rates were lower for the three and six months ended June 30, 2009 compared to the same periods in 2008. Management constantly monitors its exposure to interest rate fluctuations to mitigate risk of loss in volatile environments.


It is anticipated that the issues described in the immediately preceding two paragraphs will continue to affect issuance, pricing and activity levels of the leveraged loan market which in turn will affect merger and acquisition activity, security issuance by corporations and public issuers and may hamper investment banking activity and negatively impact the business of the Company, although such conditions appear to be easing.


As previously reported, the Company acquired a major part of CIBC World Markets’ U.S. Capital Markets Businesses on January 14, 2008, including U.S. Investment Banking, Corporate Syndicate, Institutional Sales and Trading, Equity Research, Options Trading, Convertible Bond Trading, Loan Syndication, High Yield Origination and Trading as well as related Israeli and United Kingdom equities business (the “New Capital Markets Business”).  The New Capital Markets Business, including the operations acquired in the United Kingdom along with the Company’s existing Investment Banking, Corporate Syndicate, Institutional Sales and Trading and Equities Research divisions, were combined to form the Oppenheimer Investment Banking Division (OIB Division) within the Capital Markets business segment. The results of the OIB Division will be tracked for the five years following the acquisition for purposes of determining payments due to CIBC as part of the purchase price.


The Company is not involved in the origination of sub-prime mortgages, Commercial Mortgage Backed Securities (CMBS), or Credit Default Swaps (CDS) but does, on a limited basis, participate in the secondary trading of these financial instruments.




37




For a number of years, the Company offered auction rate securities (“ARS”) to its clients. A significant portion of the market in auction rate securities ‘failed’ in February 2008. Due to credit market conditions, dealers were no longer willing or able to purchase the imbalance between supply and demand for auction rate securities. These securities have auctions scheduled on either a 7, 28 or 35 day cycle. Clients of the Company own a significant amount of ARS in their individual accounts. The absence of a liquid market for these securities presents a significant problem to clients and, as a result, to the Company. It should be noted that this is a failure of liquidity and not a default. These securities in almost all cases have not failed to pay interest or principal when due. These securities are fully collateralized for the most part and, for the most part, remain good credits. The Company has not acted as an auction agent for auction rate securities nor does it have a significant exposure in its proprietary accounts. Overall, approximately 50% of outstanding auction rate securities have been redeemed at par (100% of issue value) plus accrued dividends by their issuers thus reducing the scope of the issue for clients and the Company. There is no way to predict the pace of future redemptions or whether all of these securities will be redeemed by their issuers. There has



38




been pressure by regulators for financial services firms to redeem ARS held by clients. Large firms who were underwriters and auction agents for failed ARS (as well as some smaller firms that were not underwriters or auction agents) have made settlements with regulators generally involving the redemption of ARS with their own funds for some classes of firm clients. A number of other firms, such as the Company, who were not underwriters or auction agents, have not made settlements and their clients continue to hold ARS where they have not been redeemed by the issuers of the securities. A small number of firms have been the subject of ongoing lawsuits or regulatory proceedings by various regulators (including the Company by the Massachusetts Securities Division as discussed below) brought to compel the repurchase of client ARS.  The Company is not aware of any ARS contested regulatory proceeding where a final determination has been rendered.  


The Company’s clients held at Oppenheimer approximately $740 million of ARS at July 31, 2009, exclusive of amounts that 1) were owned by Qualified Institutional Buyers (“QIBs”), 2) were transferred to the Company, 3) were purchased by clients after February 2008, or 4) were transferred from the Company to other securities firms after February 2008. This represents a decrease of $95.7 million from amounts that our clients held as of January 31, 2009 as a result of redemptions and refinancings of such securities by the issuers of ARS.  


The Company continues to review this situation and explore options to help bring liquidity to the Company’s clients holding ARS. The Company is reviewing various programs initiated by the U.S. government to restore liquidity to the markets. The Company has taken or is considering taking various actions to facilitate the purchase of client-held ARS including filing an amendment to the charter of Oppenheimer Trust Company to become a depository bank eligible for FDIC insurance as well as to obtain access to the US Federal Reserve Discount Window; filing an application with the FDIC for Oppenheimer Trust Company to obtain deposit insurance, filing an application with the Federal Reserve for the Company to become a bank holding company; and filing applications on behalf of Oppenheimer Trust Company and Oppenheimer Holdings to participate in the US Treasury Capital Purchase Program.


Based on presently available information, the Company believes that becoming a commercial bank is of limited value in providing a liquidity solution to a large group of the Company’s clients. Accordingly, the Company is seeking a more extensive solution and is exploring various means of accessing federal lending facilities, including facilities accessible by primary dealers in U.S. Government & Agency securities as well as other lending facilities.  In addition, the Company has urged legislative and Treasury Department officials to include ARS as an eligible asset for inclusion in the Trouble Asset Lending Facility. The Company is actively engaged in a process to utilize one or more of these facilities to solve the ARS issue to the extent these facilities become accessible.  However, these facilities are currently not accessible by the Company and there is no guarantee that these federal lending facilities will remain in existence or that the Company will be able to access any of these facilities in the future in order to resolve the ARS liquidity issue.


On May 8, 2009, the Company’s shareholders voted to move the Company’s jurisdiction of incorporation from Canada to the State of Delaware (U.S.A.). The move was effective on May 11, 2009. The change may, among other things, potentially allow the Company to avail itself of various programs sponsored by the U.S. Treasury and the FDIC which may be available only to U.S.-based companies.


The Company believes that one or more of these programs might under certain circumstances provide the liquidity necessary to permit the Company to redeem ARS from



39




its clients. If the Company were to purchase all of the ARS held by former or current clients who purchased such securities prior to the market’s failure in February 2008, these purchases would likely have a material adverse effect on the Company’s financial condition including its cash position. Therefore, before purchasing any of these securities, the Company would need to assess whether it had sufficient regulatory capital or borrowing capacity to do so; at present the Company does not have such capacity. The Company does not currently believe that it is obligated to make any such purchases. See “RISK FACTORS – The Company may be adversely affected by the failure of the Auction Rate Securities Market” appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008” and “Factors Affecting ‘Forward-Looking Statements.”


The Company is focused on growing its private client and asset management businesses through strategic additions of experienced financial advisors in its existing branch system and employment of experienced money management personnel in its asset management business. In addition, the Company is committed to the improvement of its technology capability to support client service and the expansion of its capital markets capabilities while addressing the issue of managing its expenses to better align them with the current investment environment.


  Regulatory Environment


The brokerage business is subject to regulation by, among others, the SEC and FINRA (formerly the NYSE and NASD) in the United States, the Financial Services Authority (“FSA”) in the United Kingdom, the Israeli Securities Authority (“ISA”) in Israel and various state securities regulators. Events in recent years surrounding corporate accounting and other activities leading to investor losses resulted in the enactment of the Sarbanes-Oxley Act and have caused increased regulation of public companies. New regulations and new interpretations and enforcement of existing regulations are creating increased costs of compliance and increased investment in systems and procedures to comply with these more complex and onerous requirements. Increasingly, the various states are imposing their own regulations that make the uniformity of regulation a thing of the past, and make compliance more difficult and more expensive to monitor. FINRA has recently completed the unification and codification of its legacy NYSE and NASD rules.  Recent events connected to the worldwide credit crisis has made it highly likely the self-regulatory framework for financial institutions will be changed in the United States. The changes are likely to significantly reduce leverage available to financial institutions and increase the transparency of risks taken by such institutions to regulators and investors. It is impossible to presently predict the nature of such rulemaking, but, when enacted, such regulations will likely reduce returns earned by financial service providers.


The impact of the rules and requirements that were created by the passage of the Patriot Act, and the anti-money laundering regulations (AML) in the U.S. and similar laws in other countries that are related thereto have created significant costs of compliance and can be expected to continue to do so. Intervention by governments and monetary authorities around the world as a result of the current credit market dislocations will most likely result in new regulations around the world that will significantly reduce the availability of leverage to the balance sheets of financial institutions. It is impossible to predict the impact or costs associated with these yet to be announced programs and regulations.


Pursuant to FINRA Rule 3130 (formerly NASD Rule 3013 and NYSE Rule 342), the chief executive officers (“CEOs”) of regulated broker-dealers are required to certify that their companies have processes in place to establish and test policies and procedures reasonably designed to achieve compliance with federal securities laws and regulations, including applicable regulations of self-



40




regulatory organizations. The CEO of the Company is required to make such a certification on an annual basis and did so on March 18, 2009.


Other Regulatory Matters

Oppenheimer has been responding to the SEC, FINRA and several state regulators as part of an industry-wide review of the marketing and sale of auction rate securities (“ARS”).  The Company has answered several document requests and subpoenas and there have been on-the-record interviews of Company personnel.  The Company is continuing to cooperate with the investigating entities. On November 18, 2008, the Massachusetts Securities Division filed an Administrative Complaint (the “Complaint”), captioned In the Matter of Oppenheimer & Co. Inc., Albert Lowenthal, Robert Lowenthal and Greg White , Docket No. 2008-0080, alleging violations of the Massachusetts General Law, the Massachusetts Uniform Securities Act and regulations thereunder with respect to the sale by Oppenheimer of ARS to its clients. The Complaint alleges, inter alia, that Oppenheimer improperly misrepresented the nature of ARS and the overall stability and health of the ARS market.  The Complaint also alleges that key Oppenheimer executives and Auction Rate Department personnel sold their personal ARS holdings while in possession of information that the entire ARS market was in danger of failing and that those individuals failed to disclose this information to investors.  The Massachusetts Securities Division seeks various forms of relief including an order requiring Oppenheimer to offer rescission to residents of Massachusetts of sales of ARS at par and requiring Oppenheimer to make full restitution to investors who have already sold their ARS below par. The Division also seeks an order revoking the Massachusetts registration of the Chairman of Oppenheimer as a broker-dealer agent and requiring Oppenheimer and the named executives and other personnel to pay an administrative fine in an amount to be determined.  Oppenheimer and all individual respondents have filed an answer to the Complaint denying that the allegations in the Complaint have any basis in fact or law. The matter is scheduled for hearings in November 2009. All respondents intend to vigorously defend against the allegations in the Complaint.


Other Matters

A subsidiary of the Company was the administrative agent for two closed-end funds until December 5, 2005. The Company has been advised by the current administrative agent for these two funds that the Internal Revenue Service may file a claim for interest and penalties for one of these funds with respect to the 2004 tax year as a result of an alleged failure of such subsidiary to take certain actions. The Company will continue to monitor developments in this matter.


The Company operates in all state jurisdictions in the United States and is thus subject to regulation and enforcement under the laws and regulations of each of these jurisdictions. The Company has been and expects that it will continue to be subject to investigations and some or all of these may result in enforcement proceedings as a result of its business conducted in the various states.


As part of its ongoing business, the Company records reserves for legal expenses, judgments, fines and/or awards attributable to litigation and regulatory matters. In connection therewith, the Company has maintained its legal reserves at levels it believes will resolve outstanding matters, but may increase or decrease such reserves as matters warrant.


Business Continuity


The Company is committed to an on-going investment in its technology and communications infrastructure including extensive business continuity planning and investment. These costs are on-going and the Company believes that current and future costs will exceed historic levels due to business and regulatory requirements. This investment increased as a result of the Company’s need to build out its platform to accommodate the New Capital Markets Business but such



41




expansion has been completed. The Company believes that internally-generated funds from operations are sufficient to finance its expenditure program.


Results of Operations


Oppenheimer Holdings Inc. reported net profit of $7.1 million or $0.55 per share for the second quarter of 2009, compared to $1.6 million or $0.12 per share in the second quarter of 2008. Revenue for the second quarter of 2009 was $250.7 million, compared to revenue of $256.2 million in the second quarter of 2008, a decline of 2%.


The net profit for the six months ended June 30, 2009 was $5.1 million or $0.39 per share compared to a net loss of $14.5 million or $1.07 per share in the first half of 2008. Revenue for the six months ended June 30, 2009 was $456.0 million compared to $488.1 million for the same period in 2008, a decline of about 7%.


Lower revenue reflected lower income from investment banking fees as mid-sized companies continued to have limited access to the capital markets, lower fee based revenue from investment advisory services due to declines in the value of assets under management in line with market declines and lower interest revenue partially offset by an increase in commissions and principal trading revenue. However, the Company’s pre-tax results were positively impacted by the reduction in, or elimination of, many costs associated with its January 2008 acquisition of a major part of CIBC World Markets’ U.S. Capital Markets Businesses.  The Company’s expenses for the three and six months ended June 30, 2009 decreased by approximately $16 million (6%) and $67 million (13%), respectively, compared to the same periods in 2008.  Cost savings achieved during the three and six months ended June 30, 2009 were largely driven by a reduction in expenses related to deferred compensation obligations to acquired employees which decreased by $11.5 million and $23.2 million, respectively, compared to the same periods in 2008. The decrease in deferred compensation obligations for the three month period ended June 30, 2009 included a reduction of compensation expenses of $2.6 million related to changes in the assumptions used to determine the Company’s ultimate obligation under these arrangements.  The deferred compensation-related cost savings were offset by increases in variable compensation related to increased revenue produced in the second quarter of 2009. Overall compensation and related expenses were flat for the three months and decreased by 9% in the six months ended June 30, 2009 compared to the same periods in 2008.


Expenses were also reduced for the three and six months ended June 30, 2009 as a result of the migration of the acquired business to the Company’s internal systems in the second half of 2008. The cost of transitional support charges for the three and six months ended June 30, 2008 was $9.8 million and $20.6 million, respectively. This migration resulted in related increases in communication and technology costs of $4.0 million and $1.2 million, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. Interest expense decreased by 56% and 55%, respectively, in the three and six months ended June 30, 2009 as a result of: 1) lower interest rates in 2009, 2) decreased securities lending and bank loan activity, and 3) a lower outstanding balance on the Company’s Senior Secured Credit Note compared to the same periods in 2008. During the second quarter of 2009, the Company sustained a one-time charge of approximately $2.0 million in the form of a departure tax payable to the government of Canada in connection with the move of the domicile of the corporation from Canada to the U.S. as well as approximately $1.3 million in professional fees related to this matter totaling $3.3 million on a pre-tax basis ($0.21 per share on an after tax basis), included in other expenses in the condensed consolidated statement of operations. This Canadian departure tax is not deductible for tax purposes which, as a result, negatively impacted the effective tax rate for the three and six month periods ended June 30, 2009.



42




The following table and discussion summarizes the changes in the major revenue and expense categories for the periods presented (in thousands of dollars):


 

Three months ended

June 30,

Six months ended

June 30,

 

2009 versus 2008

2009 versus 2008

 

Period to Period Change


Percentage Change

Period to Period Change


Percentage Change

         

Revenue -

       

Commissions

$16,183

13%

$8,671

3%

Principal transactions, net

$10,973

57%

$25,835

89%

Interest

($8,458)

-49%

($18,956)

-54%

Investment banking

($14,439)

-40%

($22,050)

-42%

Advisory fees

($15,969)

-31%

($35,309)

-33%

Other

$6,193

112%

$9,682

141%

Total revenue

($5,517)

-2%

($32,127)

-7%

         

Expenses -

       

Compensation and related expenses

($411)

0%

($32,145)

-9%

Clearing and exchanges fees

($1,738)

-21%

($3,769)

-23%

Communications and technology

($3,958)

-21%

($1,178)

-3%

Occupancy and equipment costs

$403

2%

$1,962

6%

Interest

($6,485)

-56%

($13,084)

-55%

Other

($4,119)

-14%

($18,671)

-30%

Total expenses

($16,308)

-6%

($66,885)

-13%

Profit (loss) before income taxes

$10,791

494%

$34,758

-141%

Income tax provision (benefit)

$5,307

985%

$15,173

-150%

Net profit (loss)

$5,484

333%

$19,585

-135%


Revenue

Revenue from commissions and principal trading increased in the three and six months ended June 30, 2009 compared to the same periods in 2008 as a result of the addition of experienced financial advisors and traders as well as improved investor confidence during the second quarter of 2009. Commissions increased 13% and 3%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. Principal transactions increased 57% and 89%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. These gains resulted from the contribution of new and existing institutional fixed income sales and trading professionals amid higher activity levels from institutional investors as credit conditions continued to improve.


Advisory fees declined 31% and 33%, respectively, and interest income declined 49% and 54%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. The decline in advisory fee revenues resulted from the reduced level of assets under management at the beginning of the second quarter ($11.5 billion at March 31, 2009) which reflects overall market declines since the second half of 2008. Assets under fee based programs increased during the three months ended June 30, 2009 to $13.6 billion, an increase of 18% ($16.4 billion at June 30, 2008). Clients continued to pay down debt resulting in



43




lower average customer debit balances which were down by 41% and 40%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. Lower interest bearing balances coupled with a decline in interest rates resulted in lower margin interest revenues of $6.0 million and $13.6 million, respectively, in the three and six months ended June 30, 2009 over last year’s comparable periods. Lower interest rates also resulted in lower fees from money market funds and FDIC insured deposits which were down $4.2 million (a decline of 37%) and $7.3 million (a decline of 32%), respectively, during the three and six months ended June 30, 2009 compared to the same periods in 2008.


Investment banking activities remained disappointing as a result of limited availability of credit to mid-sized companies and the lack of equity issuances by similar companies throughout the period. Merger and acquisition activity also remained at low levels due to the inability of buyers to issue acquisition related debt and concerns over the health of the economy and corporate balance sheets. Municipal public finance activity also was significantly affected by credit and budgetary concerns for municipalities resulting in lower activity in this sector. Overall revenues from investment banking declined by 40% and 42%, respectively, for the three and six months ended June 30, 2009 compared to the same periods in 2008.


Interest revenue decreased by 49% and 54%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. Lower interest bearing balances coupled with a decline in interest rates resulted in lower margin interest revenues of $6.0 million and $13.6 million, respectively, in the three and six months ended June 30, 2009 over last year’s comparable periods.


Other revenue increased by 112% and 141%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. The increase is primarily attributable to mark-to-market increases in the value of company-owned life insurance polices that support the Company’s deferred compensation programs (offset by similar increases in related compensation expense), representing 50% and 41%, respectively, of the increase in other revenue in the three and six months ended June 30, 2009 compared to the same periods in 2008. The increase in revenue was also impacted by higher service fee income in the 2009 periods compared to the same periods in 2008, representing 26% and 19%, respectively, of the increase in other revenue in the three and six months ended June 30, 2009 compared to the same periods in 2008.


Expenses

Despite a difficult period in the capital markets, as described above, the Company’s pre-tax results were positively impacted by the reduction in or elimination of many costs associated with its January 2008 acquisition.


Overall compensation and related expenses were flat for the three months and decreased by 9% in the six months ended June 30, 2009 compared to the same periods in 2008. The cost savings related to deferred compensation obligations to acquired employees, described above, was offset by increased variable compensation tied to higher commission and principal transactions revenue in the three and six months ended June 30, 2009 compared to the same periods in 2008.


The decline of 21% and 23%, respectively, in clearing and exchange fees for the three and six months ended June 30, 2009  compared to the same periods in 2008 primarily reflects the economies of transitioning the acquired businesses to the Company’s platform.



44





The Company’s occupancy costs increased 2% and 6%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008. Communications and technology costs decreased 21% and 3%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008, offsetting costs that were reflected as transition costs in the prior year which were included in other expenses on the condensed consolidated statement of operations.


Interest expense decreased 56% and 55% for the three and six months ended June 30, 2009 compared to the same periods of 2008. The interest expense on the Company’s Senior Secured Credit Note declined by $453,000 and $1.4 million, respectively, for the three and six months ended June 30, 2009 compared to the same periods in 2008 due to declining interest rates and payments of principal.

Other expenses decreased 14% and 30%, respectively, for the three and six months ended June 30, 2009 compared to the same periods in 2008. The 2008 period included substantial transition costs related to the acquisition of the acquired businesses which have terminated, as described above. Such transition costs amounted to $9.8 million and $20.6 million, respectively, in other expenses in the three and six months ended June 30, 2008. Included in other expenses is the approximately $2 million departure tax payable to the government of Canada in connection with the move of the domicile of the corporation from Canada to the U.S. In addition, legal and professional fees have increased by 124% and 50%, respectively, in the three and six months ended June 30, 2009 compared to the same periods in 2008.


Liquidity and Capital Resources


Total assets at June 30, 2009 increased by 28% from December 31, 2008 levels primarily due to  balances of securities purchased under agreement to resell as a result of the Company significantly expanding its government trading operations in June 2009. The Company began facilitating those operations through the use of securities sold under agreement to repurchase (“repurchase agreements”) and securities purchased under agreement to resell (“reverse repurchase agreements”).  In addition, receivables from customers and receivables from brokers and clearing organizations increased.


The market environment that developed in 2008 continues in 2009 in the wake of the failure of financial institutions and seizures in the credit markets resulted in declining markets around the world and higher levels of risk. Concerns about risks to the financial system seem to be lessened in the wake of improving market and liquidity conditions in the second quarter of 2009.


The Company satisfies its need for short-term funds from internally generated funds and collateralized borrowings, consisting primarily of bank loans, stock loans, repurchase agreements and uncommitted lines of credit. The Company’s longer term capital needs have been met through the issuance of the Senior Secured Credit Note and the Subordinated Note. The amount of the Company's bank borrowings fluctuates in response to changes in the level of the Company's securities inventories and customer margin debt, changes in stock loan and repurchase agreements balances and changes in notes receivable from employees. The Company believes that such availability will continue going forward. At June 30, 2009, $86.6 million of such borrowings were outstanding compared to outstanding borrowings of $6.5 million at



45




December 31, 2008. At June 30, 2009, the Company had available collateralized and uncollateralized letters of credit of $147.2 million.



46





The unprecedented volatility of the financial markets, accompanied by a severe deterioration of economic conditions worldwide, has had a pronounced adverse affect on the availability of credit through traditional sources. As a result of concern about the ability of markets generally and the strength of counterparties specifically, many lenders have reduced and, in some cases, ceased to provide funding to the Company on an unsecured basis. Further the current environment is not conducive to most new financing and renegotiation of existing loans has become expensive and problematic. The infusion of significant government assistance to the banks and financial sector aims to mitigate these issues and there are indications that the availability of credit is beginning to ease.


In 2006, the Company issued a Senior Secured Credit Note in the amount of $125.0 million at a variable interest rate based on LIBOR with a seven-year term to a syndicate led by Morgan Stanley Senior Funding Inc., as agent.  In accordance with the Senior Secured Credit Note, the Company has provided certain covenants to the lenders with respect to the maintenance of a minimum fixed charge ratio and maximum leverage ratio and minimum net capital requirements with respect to Oppenheimer.


On December 22, 2008, certain terms of the Senior Secured Credit Note were amended, including (1) revised financial covenant levels that require that (i) the Company maintain a maximum leverage ratio (total long-term debt divided by EBITDA) of 4.45 at June 30, 2009 and (ii) the Company maintain a minimum fixed charge ratio (EBITDA adjusted for capital expenditures and income taxes divided by the sum of principal and interest payments on long-term debt) of 1.70 at June 30, 2009; (2) an increase in scheduled principal payments as follows: 2009 - $400,000 per quarter plus $4.0 million on September 30, 2009, and 2010 - $500,000 per quarter plus $8.0 million on September 30, 2010; (3) an increase in the interest rate to LIBOR plus 450 basis points (an increase of 150 basis points); and (4) a pay-down of principal equal to the cost of any share repurchases made pursuant to the Normal Course Issuer Bid. In the Company’s view, the maximum leverage ratio and minimum fixed charge ratio represent the most restrictive covenants.  At June 30, 2009, the Company was in compliance with all of its covenants.


The effective interest rate on the Senior Secured Credit Note for the three months ended June 30, 2009 was 5.72%. Interest expense, as well as interest paid on a cash basis for the three and six months ended June 30, 2009 on the Senior Secured Credit Note was $545,200 and $1.3 million, respectively  ($1.3 million and $3.0 million, respectively for the three and six months ended June 30, 2008). On June 30, 2009, the Company made a scheduled repayment of principal in the amount of $400,000 bringing the outstanding balance to $37.3 million. Of the $37.3 million principal amount outstanding at June 30, 2009, $5.8 million of principal is expected to be paid within 12 months.


The obligations under the Senior Secured Credit Note are guaranteed by certain of the Company’s subsidiaries, other than broker-dealer subsidiaries, with certain exceptions, and are collateralized by a lien on substantially all of the assets of each guarantor, including a pledge of the ownership interests in each first-tier broker-dealer subsidiary held by a guarantor, with certain exceptions.


On January 14, 2008, in connection with the acquisition of certain capital markets businesses from CIBC (the “New Capital Markets Business”), CIBC made a loan in the amount of $100.0 million and the Company issued a Subordinated Note to CIBC in the amount of $100.0 million at a variable interest rate based on LIBOR. The Subordinated Note is due and payable on January 31, 2014 with interest payable on a quarterly basis. The purpose of this note is to support the capital requirements of the New Capital Markets Business.  In accordance with the Subordinated Note, the Company has provided certain covenants to CIBC with respect to the maintenance of a minimum fixed charge ratio and maximum leverage ratio and minimum net capital requirements with respect to Oppenheimer.  



47





Effective December 23, 2008, certain terms of the Subordinated Note were amended, including (1) revised financial covenant levels that require that (i) the Company maintain a maximum leverage ratio of 5.25 at June 30, 2009 and (ii) the Company maintain a minimum fixed charge ratio of 1.40 at June 30, 2009; and (2) an increase in the interest rate to LIBOR plus 525 basis points (an increase of 150 basis points).  In the Company’s view, the maximum leverage ratio and minimum fixed charge ratio represent the most restrictive covenants.  At June 30, 2009, the Company was in compliance with all of its covenants.


The effective interest rate on the Subordinated Note for the three months ended June 30, 2009 was 6.46%. Interest expense, as well as interest paid on a cash basis for the three and six months ended June 30, 2009, on the Subordinated Note was $1.6 million and $3.3 million, respectively ($1.6 million and $3.2 million, respectively, for the three and six months ended June 30, 2008).


Funding Risk


Amounts are expressed in thousands of dollars.

 

For the six months ended June 30,

 

2009

2008

Cash used in operating activities

$(60,690)

$(111,539)

Cash used in investing activities

(4,155)

(58,282)

Cash provided by financing activities

66,273

200,930

Net  increase in cash and cash equivalents

$1,428

$31,109


Management believes that funds from operations, combined with the Company's capital base and available credit facilities, are sufficient for the Company's liquidity needs in the foreseeable future. (See Factors Affecting “Forward-Looking Statements”).


Other Matters


During the second quarter of 2009, the Company purchased no Class A Shares pursuant to the Normal Course Issuer Bid. On May 27, 2009, the Company announced its intention to purchase up to 600,000 shares of its Class A non-voting common stock commencing June 2, 2009 and ending December 31, 2009. The Company will undertake repurchases only if market conditions warrant such repurchases.


During the second quarter of 2009, the Company issued 2,075 Class A Shares pursuant to the Company’s share-based compensation programs.


On May 29, 2009, the Company paid cash dividends of U.S. $0.11 per Class A and Class B Share totaling approximately $1.4 million from available cash on hand.


On July 29, 2009, the Board of Directors declared a regular quarterly cash dividend of U.S. $0.11 per Class A and Class B Share payable on August 28, 2009 to shareholders of record on August 14, 2009.


The book value of the Company’s Class A and Class B Shares was $33.12 at June 30, 2009 compared to $32.94 at June 30, 2008, an increase of less than 1%, based on total outstanding shares of 13,070,747 and 13,340,094, respectively.



48





The diluted weighted average number of Class A and Class B Shares outstanding for the three months ended June 30, 2009 was 13,283,500 compared to 13,649,203 outstanding for the same period in 2008.


Off-Balance Sheet Arrangements


Information concerning the Company’s off-balance sheet arrangements is included in Note 5 of the notes to the condensed consolidated financial statements. Such information is hereby incorporated by reference.


Contractual and Contingent Obligations


The Company has contractual obligations to make future payments in connection with non-cancelable lease obligations and debt assumed upon the acquisition of the New Capital Markets Business as well as debt issued in 2006. The Company also has contractual obligations in connection with the acquisition of the New Capital Markets Business to make payments to CIBC in connection with deferred compensation earned by former CIBC employees as well as the earn-out to be paid in 2013.


The following table sets forth these contractual and contingent commitments as at June 30, 2009.



49




Amounts are expressed in millions of dollars.

   

 

Total

Less than 1 Year

1-3 Years

3-5 Years

More than 5 Years

Minimum rentals

$163

$20

$72

$43

$28

Committed capital

4

4

-

-

-

Earn-out

25

-

-

25

-

Deferred compensation commitments (1)


44


14


30


-


-

Senior Secured Credit Note

37

6

18

13

-

Subordinated Note

100

-

-

100

-

Total

$373

$44

$120

$181

$28

(1) Represents payments to be made to CIBC in relation to deferred incentive compensation to former CIBC employees for awards made by CIBC prior to the January 14, 2008 acquisition by the Company.


New Accounting Pronouncements


See Note 2 to the condensed consolidated financial statements. Such information is hereby incorporated by reference.


Factors Affecting “Forward-Looking Statements”


From time to time, the Company may publish “Forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act or make oral statements that constitute forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products, anticipated market performance, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to



50




comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company’s actual results to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. These risks and uncertainties, many of which are beyond the Company’s control, include, but are not limited to: (i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements which could affect the cost and method of doing business, (v) fluctuations in currency rates, (vi) general economic conditions, both domestic and international, (vii) changes in the rate of inflation and the related impact on the securities markets, (viii) competition from existing financial institutions and other participants in the securities markets, (ix) legal developments affecting the litigation experience of the securities industry and the Company, including developments arising from the failure of the Auction Rate Securities markets, (x) changes in federal and state tax laws which could affect the popularity of products sold by the Company, (xi) the effectiveness of efforts to reduce costs and eliminate overlap, (xii) war and nuclear confrontation, (xiii) the Company’s ability to achieve its business plan, (xiv) corporate governance issues, (xv) the impact of the credit crisis on business operations, (xvi) the effect of bailout and related legislation, (xvii) the consolidation of the banking and financial services industry, (xviii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity; (xix) credit, operations, legal and regulatory risks; and (xx) risks related to foreign operations. There can be no assurance that the Company has correctly or completely identified and assessed all of the factors affecting the Company’s business. The Company does not undertake any obligation to publicly update or revise any forward-looking statements.


ITEM 3. Quantitative and Qualitative Disclosures About Market Risk


During the three months ended June 30, 2009, there were no material changes to the information contained in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.


ITEM 4. Controls and Procedures


The Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rule 13a–15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.


Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision–making can be faulty and that break-downs can occur because of a simple error or omission. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in



51




achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.


The Company confirms that its management, including its Chief Executive Officer and its Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in its reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.


Changes in Internal Control over Financial Reporting


There have been no significant changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.



52








53




PART II

OTHER INFORMATION


ITEM 1. Legal Proceedings

Many aspects of the Company’s business involve substantial risks of liability. In the normal course of business, the Company has been the subject of customer complaints and has been named as defendant or co-defendant in various lawsuits creating substantial exposure. The Company is also involved from time to time in certain governmental and self-regulatory agency investigations and proceedings. These proceedings arise primarily from securities brokerage, asset management and investment banking activities. There has been an increased incidence of regulatory investigations in the financial services industry in recent years, including customer claims, seeking in total substantial damages.


While the ultimate resolution of routine pending litigation and other matters cannot be currently determined, in the opinion of management, after consultation with legal counsel, the Company has no reason to believe that the resolution of these matters will have a material adverse effect on its financial condition. However, the Company’s results of operations could be materially affected during any period if liabilities in that period differ from prior estimates. In addition, an adverse result in any of the matters set forth below, each of which are at a preliminary stage, may have a material adverse effect on the Company’s financial condition, including its cash position. The materiality of legal 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 matters.  See “Risk Factors – The Company may be adversely affected by the failure of the Auction Rate Securities Market” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, “Factors Affecting ‘Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Environment.”


Auction Rate Securities Matters


For a number of years, the Company offered Auction Rate Securities (“ARS”) to its clients. A significant portion of the market in auction rate securities ‘failed’ in February 2008 due to credit market conditions, and dealers were no longer willing or able to purchase the imbalance between supply and demand for auction rate securities.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Environment.”


On April 11, 2008, Oppenheimer (and a number of its affiliates) was named as a defendant in a proposed class action complaint captioned Bette M. Grossman vs. Oppenheimer & Co. Inc. et. al. in the United States District Court for the Southern District of New York. The complaint alleges, among other things, that Oppenheimer violated Section 10 (b) of the Securities Exchange Act of 1934 (as well as other provisions of the Federal securities laws) by making material misstatements and omissions and engaging in deceptive activities in the offer and sale of ARS. Oppenheimer filed an answer to the complaint denying the allegations. Oppenheimer believes it has meritorious defenses to the claims raised in the lawsuit and intends to defend against these claims vigorously.  On February 20, 2009 this action was consolidated with the Vining action described below.


On May 12, 2008, Oppenheimer (and a number of its affiliates) was named as a defendant in a proposed class action complaint captioned David T. Vining vs. Oppenheimer & Co. Inc. et. al. in the United States District Court for the Southern District of New York.  The complaint alleges, among other things, that Oppenheimer violated Section 10 (b) of the Securities Exchange Act of 1934 (as well as other provisions of the Federal securities laws) by making material misstatements and omissions and engaging in deceptive activities in the offer and sale of ARS. Oppenheimer filed an



54




answer to the complaint denying the allegations. Oppenheimer believes it has meritorious defenses to the claims raised in the lawsuit and intends to defend against these claims vigorously. On February 20, 2009 the Grossman action discussed above was consolidated with this action.


Oppenheimer has been responding to inquiries from the SEC, FINRA and several state regulators as part of an industry-wide review of the marketing and sale of ARS.  On November 18, 2008, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Oppenheimer and certain of its executives and employees alleging various causes of action with respect to the sale by Oppenheimer of ARS to its clients.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Environment – Other Regulatory Matters.”


Oppenheimer offered ARS to its clients in the same manner as dozens of other “downstream” firms in the ARS marketplace -- as an available cash management option for clients seeking to increase their yields on short-term investments similar to a money market fund. The Company believes that Oppenheimer’s participation therefore differs dramatically from that of the larger broker-dealers who have recently entered into settlements with state and federal regulators, agreeing to purchase billions of dollars of their clients’ ARS holdings.  Unlike these other broker-dealers, Oppenheimer did not act as the lead or sole lead managing underwriter or dealer in any ARS auctions during the relevant time period, did not enter support bids to ensure that any ARS auctions cleared, and played no role in any decision by the lead underwriters or broker-dealers to discontinue entering support bids and allowing auctions to fail.


In February 2009, Oppenheimer received notification of a filing of an arbitration claim before FINRA captioned U.S. Airways v. Oppenheimer & Co. Inc., et al . seeking an award compelling Oppenheimer to repurchase approximately $250 million in ARS previously purchased by U.S. Airways through Oppenheimer or, alternatively, an award rescinding such sale. In April 2009, Oppenheimer was served with a complaint in the United States District Court, Eastern District of Kentucky captioned Ashland, Inc. and Ash Three, LLC v. Oppenheimer & Co. Inc. seeking compensatory and consequential damages as a result of plaintiff’s purchase of approximately $194 million in ARS.  In each of these cases, plaintiffs’ seek an award of punitive damages from Oppenheimer as well as interest on such award.   Each plaintiff in these cases bases its claim on numerous causes of action including, but not limited to, fraud, gross negligence, misrepresentation and suitability. Oppenheimer intends to vigorously defend against any such claims. Each of U.S. Airways and Ashland is a publicly-traded corporation that bought and sold ARS for many years through several broker dealers, not just Oppenheimer.  Each is also a “Qualified Institutional Buyer” (as defined in Rule 144A of the Securities Exchange Act of 1934) and purchased ARS for cash management purposes.


On July 10, 2009, in the arbitration noted above captioned U.S. Airways v. Oppenheimer & Co. Inc. et. al . Oppenheimer asserted a Third Party Statement of Claim against Deutsche Bank Securities, Inc. and Deutsche Bank A.G. (the “Deutsche Entities”).  At the same time Oppenheimer filed its Answer denying any liability to U.S. Airways.  To the extent there is a determination by an arbitration panel that U.S. Airways has been harmed, Oppenheimer’s Third Party Statement of Claim against the Deutsche Entities alleges that the Deutsche Entities are liable to U.S. Airways because of their role in the process of creating, marketing and procuring ratings for certain auction rate credit-link notes.  



In February 2009, the Company was served with an arbitration claim before FINRA captioned Hansen Beverage Company v. Oppenheimer & Co. Inc., et al (“Respondents”) .  Hansen demands that its investments in approximately $60 million in ARS, which are currently illiquid and which



55




Hansen purchased from Oppenheimer, be rescinded.  The Statement of Claim alleges that Oppenheimer misrepresented liquidity and market risks in the ARS market when recommending ARS to Hansen.  The Company has filed its response to the Statement of Claim and also filed Motions to Dismiss Respondents Oppenheimer Holdings and Oppenheimer Asset Management as parties improperly named in the arbitration.  Further, as of this date, approximately $16 million of the $60 million Hansen held in ARS have been redeemed by their issuers.  Hansen is also a “Qualified Institutional Buyer” (as defined in Rule 144A of the Securities Exchange Act of 1934) and purchased ARS for cash management purposes.


Between April 2008 and May 2009, Oppenheimer & Co. Inc. and certain affiliated parties have been served with approximately 10 arbitration claims before FINRA, by individuals and entities who purchased ARS through Oppenheimer in amounts ranging from $25,000 to $25 million, seeking awards compelling Oppenheimer to repurchase such ARS or, alternatively, awards rescinding such sales, based on a variety of causes of action similar to those described above. The Company has filed, or is in the process of filing, its responses to such claims and is awaiting hearings regarding such claims before FINRA. Oppenheimer believes it has meritorious defenses to these claims and intends to vigorously defend against these claims. Oppenheimer may also implead third parties, including underwriters, where it believes such action is appropriate. It is possible that other individuals or entities who purchased ARS from Oppenheimer may bring additional claims against Oppenheimer in the future for repurchase or recission.


ITEM 1A. Risk Factors


During the three months ended June 30, 2009, there were no material changes to the information contained in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, except as described in Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – under the caption “Business Environment”.


ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



During the three months ended June 30, 2009, the Company did not repurchase any Class A Shares pursuant to its Normal Course Issuer Bid. On May 27, 2009, the Company announced its intention to purchase up to 600,000 of its Class A non-voting common shares commencing June 2, 2009 and ending December 31, 2009. The Company will undertake repurchases only if market conditions warrant such repurchases.



ITEM 3. Defaults Upon Senior Securities


Not applicable



56






ITEM 4. Submission of Matters to a Vote of Security Holders


The Company held its annual and special meeting of shareholders on May 8, 2009. The following discloses the voting results:


Description of the Matter

For

Against

Withheld

1.

Election of Directors - Each of the following nine nominees was elected as a director of the Company to serve until the next annual meeting of shareholders by a vote of the holders of the Company’s Class B voting shares: J.L. Bitove, R. Crystal, W. Ehrhardt, M.A.M. Keehner, A.G. Lowenthal, K.W. McArthur, A.W. Oughtred, E.K. Roberts, and B. Winberg.

96,358

-

-

2.

Appointment of Auditors -  PricewaterhouseCoopers LLP was re-appointed as the Company’s independent registered accounting firm to hold office until the next annual meeting of shareholders and the Board of Directors and Audit Committee were authorized to fix the Auditors’ remuneration by a vote of the holders of the Company’s Class B voting shares.

96,358

-

-

3.

Special resolution authorizing the Company to change its jurisdiction of incorporation – The authorization of the Company to make an application under Section 188 of the Canada Business Corporations Act to change its jurisdiction of incorporation from the federal jurisdiction of Canada to the State of Delaware, U.S.A., by way of a domestication under Section 388 of the General Corporation Law of the State of Delaware, and to approve the certificate of incorporation authorized in the special resolution to be effective as of the date of the Company’s domestication, was approved by a vote of the holders of the Company’s Class B voting shares and the holders of the Company’s Class A non-voting shares voting together as a class.

11,260,296

767,324

-



ITEM 5. Other Information


None.




57




ITEM 6. Exhibits


Exhibits


3.1

Certificate of Incorporation of Oppenheimer Holdings Inc., a Delaware corporation.

3.2

By-Laws of Oppenheimer Holdings Inc., a Delaware corporation

3.3

Certificate of Corporate Domestication of Oppenheimer Holdings Inc., a Canadian corporation, as filed with the Secretary of State of the State of Delaware on May 11, 2009.

3.4

Certificate of Discontinuance of Oppenheimer Holdings Inc., a Canadian corporation, as filed with Corporations Canada on May 11, 2009.

31.1

Certification of Albert G. Lowenthal

31.2

Certification of Elaine K. Roberts

32

Certification of Albert G. Lowenthal and Elaine K. Roberts



58





 SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized, in the City of New York, New York on this 6 th   day of August, 2009.


                                   


 

 OPPENHEIMER HOLDINGS INC.



                                   By: “A.G. Lowenthal” ___________________

                                     

A.G. Lowenthal, Chairman and Chief Executive Officer

                                    

(Principal Executive Officer)



                               By:    “E.K. Roberts” ________________________

                          E.K. Roberts, President, Treasurer and Chief Financial Officer

(Principal Financial and Accounting Officer)   



59







60




EXHIBIT 3.3



CERTIFICATE OF CORPORATE DOMESTICATION


OF


Oppenheimer Holdings Inc.



The undersigned, presently a corporation organized and existing under the laws of Canada, for the purposes of domesticating a corporation under Section 388 of the General Corporation Law of the State of Delaware, does certify that:  


1.  The corporation (hereinafter called the "corporation") was first formed, incorporated, or otherwise came into being on November 16, 1933 in the jurisdiction of British Columbia, Canada, continued on October 12, 1977 under the laws of Ontario, Canada, and continued on May 11, 2005 under the federal laws of Canada.



2.  The name of the corporation immediately prior to the filing of this certificate of corporate domestication pursuant to the provisions of Section 388 of the General Corporation Law of the State of Delaware was Oppenheimer Holdings Inc.



3.  The name of the corporation as set forth in its certificate of incorporation to be filed in accordance with Section 388(b) of the General Corporation Law of the State of Delaware is Oppenheimer Holdings Inc.


4.  The jurisdiction that constituted the seat, siege social, or principal place of business or central administration of the corporation, or other equivalent thereto under applicable law immediately prior to the filing of this certificate of domestication pursuant to the provisions of Section 388 of the General Corporation Law of the State of Delaware is Ontario, Canada.


5.  The domestication has been approved in the manner provided for by the document, instrument, agreement or other writing, as the case may be, governing the internal affairs of the corporation and the conduct of its business or by applicable non-Delaware law, as appropriate.


6.  The effective time of this certificate of domestication shall be 2pm EST May 11, 2009.  

IN WITNESS WHEREOF, the corporation has caused this Certificate to be executed by its duly authorized officer on this 8th day of May, 2009.

OPPENHEIMER HOLDINGS INC.,


a Canadian corporation

By: “E.K. Roberts”


Name:  Elaine K. Roberts
Title:    President and Treasurer




A/72841955.3


EXHIBIT 32.1


CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350


The undersigned, Albert G. Lowenthal, Chairman and Chief Executive Officer of Oppenheimer Holdings Inc. (the "Company"), and Elaine K. Roberts, President and Chief Financial Officer of the Company, hereby certifies that to his/her knowledge the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 of the Company filed with the Securities and Exchange Commission on the date hereof  (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period specified.


Signed at New York, New York, this 6th day of August, 2009.


“A.G. Lowenthal”

Albert G. Lowenthal

Chairman and Chief Executive Officer


“E.K. Roberts”

Elaine K. Roberts

President and Chief Financial Officer




CERTIFICATION EXHIBIT 31.1


I, Albert G. Lowenthal, certify that:


1.

I have reviewed this quarterly report on Form 10-Q of Oppenheimer Holdings Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


By:

“A.G. Lowenthal”

Name: Albert G. Lowenthal

Title: Chief Executive Officer


August 6, 2009




CERTIFICATION EXHIBIT 31.2


I, Elaine K. Roberts, certify that:


1. I have reviewed this quarterly report on Form 10-Q of Oppenheimer Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


By:

“E.K. Roberts”

Name: Elaine K. Roberts

Title: Chief Financial Officer


August 6, 2009




EXHIBIT 3.2

OPPENHEIMER HOLDINGS INC.

BY-LAWS

ARTICLE I

GENERAL

1.1.

Offices .  The registered office of Oppenheimer Holdings Inc. (the “ Company ”) shall be in the City of Wilmington, County of New Castle, State of Delaware.  The Company may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Company may require.

1.2.

Seal .  The Company may have one or more different corporate seals, which the Board of Directors may from time to time adopt or change, on which the name of the Company shall appear.

1.3.

Fiscal Year .  The fiscal year of the Company shall be the period from January 1 through December 31 unless changed by resolution of the Board of Directors.

ARTICLE II

STOCKHOLDERS

2.1.

Place of Meetings .  Each meeting of the stockholders shall be held upon notice as hereinafter provided, at such place, either within or without of the State of Delaware, as the Board of Directors shall have determined and as shall be stated in the relevant notice of meeting.

2.2.

Annual Meeting .  The annual meeting of the stockholders shall be held each year on such date and at such time as the Board of Directors may determine.  At each annual meeting the stockholders entitled to vote shall elect such members of the Board of Directors as are standing for election, by plurality vote and they may transact such other corporate business as may properly be brought before the meeting.  At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the Company’s Certificate of Incorporation (as amended and in effect from time to time, the “ Charter ”), or these by-laws.

2.3.

Quorum .  At all meetings of the stockholders, the presence, in person or represented by proxy, of at least two (2) stockholders holding a majority in voting power of the stock issued and outstanding and entitled to vote, shall constitute a quorum requisite for the transaction of business except as otherwise provided by law, the Charter or these by-laws.  Whether or not there is such a quorum at any meeting, the chairman of the meeting or the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, may adjourn the meeting from time to time without notice other than announcement at the meeting.  If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted that might have been transacted if the meeting had been held as originally called.  The stockholders present in person or by proxy at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

2.4.

Right to Vote; Proxies .  Subject to the provisions of the Charter, each holder of a share or shares of capital stock of the Company having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him.  Any stockholder entitled to vote at any meeting of stockholders may vote either in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or by proxy, but no proxy that is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period.  A proxy may be granted by a writing executed by the stockholder or his authorized agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization, or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, subject to the conditions set forth in Section 212 of the General Corporation Law of the State of Delaware, as it may be amended from time to time (the “ DGCL ”).

2.5.

Voting .  At all meetings of stockholders, except as otherwise expressly provided for by statute, the Charter or these by-laws, (i) in all matters other than the election of directors, the affirmative vote of a majority in voting power of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders, and (ii) members of the Board of Directors, as are standing for election, shall be elected by a plurality vote.

2.6.

Notice of Annual Meetings .  Notice of the annual meeting of the stockholders shall be given to each stockholder entitled to vote at such meeting at such address as appears on the stock books of the Company at least ten (10) days (and not more than sixty (60) days) prior to the meeting.  The Board of Directors may postpone any annual meeting of the stockholders at its discretion, even after notice thereof has been mailed.  It shall be the duty of every stockholder to furnish to the Secretary of the Company or to the transfer agent, if any, of the class of stock owned by him and his post-office address, and to notify the Secretary of any change therein.  Notice need not be given to any stockholder who submits a written waiver of notice given by him before or after the time stated therein.  Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

2.7.

Stockholders’ List .  A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the officer who has charge of the stock ledger and shall be open to examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days before such meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during the ordinary business hours at the principal office of the Company.  Said list shall be open to examination during the whole time of said meeting, at the place of said meeting, or, if the meeting held is by remote communication, on a reasonably accessible electronic network and the information required to access such list shall be provided with the notice of the meeting.

2.8.

Special Meetings .  Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called only by the Chairman of the Board of Directors, a majority of the Board of Directors, the Chief Executive Officer or the President.  Any such person or persons may postpone any special meeting of the stockholders at its or their discretion, even after notice thereof has been mailed.

2.9.

Notice of Special Meetings .  Notice of a special meeting of stockholders, stating the time and place and object thereof shall be given not less than ten (10) nor more than sixty (60) days before such meeting, to each stockholder entitled to vote at such meeting, at such address as appears on the books of the Company.  No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof, or such other business as may be germane or supplementary to that stated in said notice or notices.  Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein.  Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

2.10.

Inspectors .

(a)

If required by law, one or more inspectors shall be appointed by the Board of Directors in advance of any meeting of the stockholders to act at the meeting and make a written report thereof.  If no inspector or alternate is able to act at a meeting of the stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at such meeting.  Before discharging his duties as an inspector, each inspector shall take and sign an oath to execute his duties with strict impartiality and to the best of his ability.  At the meeting for which the inspector or inspectors are appointed, he or they shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify the determination of the shares represented and the count of all votes and ballots.

(b)

At any time at which the Company has a class of voting stock that is (i) listed on a national securities exchange, or (ii) held of record by more than 2,000 stockholders, the provisions of Section 231 of the DGCL with respect to inspectors of election and voting procedures shall apply, in lieu of the provisions of paragraph (a) of this Section 2.10.

2.11.

Procedures .  Nominations for the Board of Directors and other business may be brought before a meeting of stockholders solely by holders of those classes of stock entitled to voting rights as set forth in the Charter, and solely in accordance with the provisions of this Section 2.11.  For such nominations for the Board of Directors or for such other business to be properly brought by a stockholder before a meeting of stockholders, the stockholder must first have given timely written notice thereof to the Secretary of the Company.  To be timely, a notice of nominations or other business to be brought before an annual meeting of stockholders must be delivered to the Secretary not less than 90 nor more than 120 days prior to the first anniversary of the date of the Company’s annual meeting of the preceding year, or if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary, such notice must be delivered not earlier than 90 days prior to such annual meeting and not later than the later of (i) 60 days prior to the annual meeting or (ii) 10 days following the date on which public announcement of the date of such annual meeting is first made by the Company.  With respect to special meetings of stockholders, such notice must be delivered to the Secretary not more than 120 days prior to such meeting and not later than the later of (i) 90 days prior to such meeting or (ii) 10 days following the date on which public announcement of the date of such meeting is first made by the Company.  Such notice must contain the name and address of the stockholder delivering the notice and a statement with respect to the amount of the Company’s stock beneficially and/or legally owned by such stockholder, the nature of any such beneficial ownership of such stock, the beneficial ownership of any such stock legally held by such stockholder but beneficially owned by one or more others, and the length of time for which all such stock has been beneficially and/or legally owned by such stockholder, and information about each nominee for election as a director substantially equivalent to that which would be required in a proxy statement pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated by the Securities and Exchange Commission thereunder, and/or a description of the proposed business to be brought before the meeting, as the case may be.

The foregoing notice requirements of this Section 2.11 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Company of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Company to solicit proxies for such annual meeting.

ARTICLE III

DIRECTORS

3.1.

Number of Directors .

(a)

Except as otherwise provided by law, the Charter, or these by-laws, the property and business of the Company shall be managed by or under the direction of a Board of Directors.  Directors need not be stockholders, residents of Delaware, or citizens of the United States.  The use of the phrase “whole board” herein refers to the total number of directors which the Company would have if there were no vacancies.

(b)

The number of directors constituting the whole Board of Directors shall be as determined by resolution of the Board of Directors from time to time, with a minimum of three (3) and a maximum of eleven (11) directors.  Members of the Board of Directors shall hold office until their respective successors are elected and qualified or until their earlier death, incapacity, resignation, or removal.  

3.2.

Terms of Office .  The directors shall be elected by ballot at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify or until his earlier resignation or removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for that purpose.  If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term.

3.3.

Resignation .  Any director of the Company may resign at any time by giving notice in writing or by electronic transmission to the Chairman of the Board, the Chief Executive Officer, or the President of the Company.  Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance.  Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

3.4.

Removal .  Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority in voting power of the shares then entitled to vote at an election of directors.

3.5.

Place of Meetings and Books .  The Board of Directors may hold their meetings and keep the books of the Company outside the State of Delaware, at such places as they may from time to time determine.

3.6.

General Powers .  In addition to the powers and authority expressly conferred upon them by these by-laws, the Board of Directors may exercise all such powers of the Company and do all such lawful acts and things as are not by statute or by the Charter or by these by-laws directed or required to be exercised or done by the stockholders.

3.7.

Committees .  The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Company.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.  Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it.

3.8.

Compensation of Directors .  The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board and may delegate this authority to one or more committees.  The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director.  No such payment shall preclude any director from serving the Company in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

3.9.

Regular Meetings .  No notice shall be required for regular meetings of the Board of Directors for which the time and place have been fixed.  Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat.  Notice need not be given to any director who submits a written waiver of notice signed by him before or after the time stated therein.  Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice.

3.10.

Special Meetings .  Special meetings of the Board may be called by the Chairman of the Board, if any, or the Chief Executive Officer or the President, on two (2) days notice to each director; special meetings may also be called by the Secretary in like manner and on like notice, on the written request of two or more directors.

3.11.

Quorum .  At all meetings of the Board of Directors, a majority of the total number of directors in office (but not less than one-third of the number of directors established by the Board of Directors pursuant to Section 3.1 of these by-laws) shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the Charter, or by these by-laws.  If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting that shall be so adjourned.

3.12.

Telephonic Participation in Meetings .  Members of the Board of Directors or any committee designated by such board may participate in a meeting of the Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting.

3.13.

Action by Consent .  Unless otherwise restricted by the Charter or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consents or electronic transmissions thereto are signed or given by all members of the Board of Directors or of such committee, as the case may be, and such written consents or electronic transmissions are filed with the minutes of proceedings of the Board or committee.

ARTICLE IV

OFFICERS

4.1.

Selection; Statutory Officers .  The officers of the Company shall be chosen by the Board of Directors.  There shall be a Chief Executive Officer, a President, a Secretary, and a Treasurer, and there may be a Chairman of the Board of Directors, one or more Vice Chairmen, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers as the Board of Directors may elect.  Any number of offices may be held by the same person, except that the offices of President and Secretary shall not be held by the same person simultaneously.

4.2.

Time of Election .  The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders.  None of said officers need be a director.

4.3.

Additional Officers .  The Board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

4.4.

Terms of Office .  Each officer of the Company shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal.  Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors.  Any vacancy occurring in any office of the Company by death, resignation, removal or otherwise shall be filled by the Board of Directors.

4.5.

Compensation of Officers .  The Board of Directors shall have power to fix the compensation of all officers of the Company.  It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers.

4.6.

Chairman of the Board .  The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors.

4.7.

Vice-Chairmen .  The Vice-Chairmen shall perform such of the duties of the Chairman of the Board on behalf of the Company as may be respectively assigned to them from time to time by the Board of Directors or by the Chairman of the Board.

4.8.

Chief Executive Officer .  Under the supervision of the Board of Directors, the Chief Executive Officer shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors to confer any specific power, except such as may be by statute exclusively conferred to the Chief Executive Officer, upon any other officer or officers of the Company.  The Chief Executive Officer shall perform and do all acts and things incident to the position of Chief Executive Officer and such other duties as may be assigned to him from time to time by the Board of Directors.

4.9.

President .   Unless there is a Chairman of the Board or a Chief Executive Officer, the President shall preside at all meetings of directors and stockholders.  Under the supervision of the Board of Directors, the President shall have the general supervision of the Company’s business and affairs, subject, however, to the right of the Board of Directors to confer any specific power, except such as may be by statute exclusively conferred to the President, upon any other officer or officers of the Company.  The President shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or the Chief Executive Officer.

4.10.

Vice-Presidents .  The Vice-Presidents shall perform such of the duties of the President on behalf of the Company as may be respectively assigned to them from time to time by the Board of Directors, the Chief Executive Officer or the President.  The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors.

4.11.

Treasurer .  The Treasurer shall have the care and custody of all the funds and securities of the Company that may come into his hands as Treasurer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Company in such bank or banks or depository as the Board of Directors, or the officers or agents to whom the Board of Directors may delegate such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Company.  He may sign all receipts and vouchers for the payments made to the Company.  He shall render an account of his transactions to the Board of Directors as often as the Board or any applicable committee shall require the same.  He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Company.  He shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors.  He shall when requested, pursuant to a vote of the Board of Directors, give a bond to the Company conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Company.

4.12.

Secretary .  The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders; he shall attend to the giving and serving of all notices of the Company.  Except as otherwise ordered by the Board of Directors or the Chief Executive Officer, he shall attest the seal of the Company upon all contracts and instruments executed under such seal and shall affix the seal of the Company thereto and to all certificates of shares of capital stock of the Company.  He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or the Chief Executive Officer may direct.  He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors.

4.13.

Assistant Secretary .  The Board of Directors or any two of the officers of the Company acting jointly may appoint or remove one or more Assistant Secretaries of the Company.  Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors or the Chief Executive Officer, the President or the Executive Vice-President or the Treasurer or the Secretary may designate.

4.14.

Assistant Treasurer .  The Board of Directors or any two of the officers of the Company acting jointly may appoint or remove one or more Assistant Treasurers of the Company.  Any Assistant Treasurer upon his appointment shall perform such of the duties of the Treasurer, and also any and all such other duties as the Board of Directors, the Chief Executive Officer, or the President or the Executive Vice-President or the Treasurer or the Secretary may designate.

4.15.

Subordinate Officers .  The Board of Directors may select such subordinate officers as it may deem desirable.  Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors may prescribe.  The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof.

ARTICLE V

STOCK

5.1.

Stock .  The shares of the Company’s stock may be certificated or uncertificated and shall be entered in the books of the Company and registered as they are issued.  Any certificates representing shares of stock shall be in such form as the Board of Directors shall prescribe, certifying the number and class and/or series of shares of the stock of the Company owned by the stockholder.  Any certificate issued to a stockholder of the Company shall be numbered and shall certify the holder’s name and number and class and/or series of shares and shall be signed by both of (i) any one of the Chairman or Vice Chairman, President or a Vice-President, and (ii) any one of the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall be sealed with the corporate seal of the Company and any and all signatures on the certificate, including the corporate seal may be facsimiles.  If such certificate is countersigned (1) by a transfer agent other than the Company or its employee, or (2) by a registrar other than the Company or its employee, any or all of the signatures on the certificate, including the certificate of the transfer agent and registrar, and the corporate seal may be facsimiles.  In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Company, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Company, such certificate or certificates may nevertheless be adopted by the Company and be issued and delivered as though the person or persons who signed such certificate or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers of the Company.

5.2.

Fractional Share Interests .  The Company may, but shall not be required to, issue fractions of a share.  If the Company does not issue fractions of a share, it shall (i) arrange for the disposition of fractional interests by those entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (iii) issue scrip or warrants in registered or bearer form that shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share.  A certificate for a fractional share shall or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Company in the event of liquidation.  The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Company and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions that the Board of Directors may impose.

5.3.

Transfers of Stock .  Subject to any transfer restrictions then in force, the shares of stock of the Company shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates, if any, shall be surrendered to the Company by the delivery thereof to the person in charge of the stock and transfer books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates, if any, shall thereupon be issued.  The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by the laws of Delaware.

5.4.

Record Date .  For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, that shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.  If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.  A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

5.5.

Transfer Agent and Registrar .  The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them.

5.6.

Dividends .  

(a)

Power to Declare .  Dividends upon the capital stock of the Company, subject to the provisions of the Charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law.  Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Charter and the laws of Delaware.

(b)

Reserves .  Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company, or for such other purpose as the directors shall think conducive to the interest of the Company, and the directors may modify or abolish any such reserve in the manner in which it was created.

5.7.

Lost, Stolen, or Destroyed Certificates .  No certificates for shares of stock of the Company shall be issued in place of any certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft, or destruction and upon indemnification of the Company and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe.

ARTICLE VI

MISCELLANEOUS MANAGEMENT PROVISIONS

6.1.

Checks, Drafts, and Notes .  All checks, drafts, or orders for the payment of money, and all notes and acceptances of the Company shall be signed by such officer or officers, or such agent or agents, as the Board of Directors may designate.

6.2.

Notices .  

(a)

Notices to directors may, and notices to stockholders shall, be in writing and (i) delivered personally, (ii) mailed to the directors or stockholders at their addresses appearing on the books of the Company or (iii) delivered by a form of electronic transmission which is consented to by the stockholder or the director to whom the notice is given.  Notice by mail shall be deemed to be given at the time when the same shall be mailed.  Notice by electronic transmission shall be deemed to be given (i) if by facsimile telecommunication, when directed to a number at which the stockholder or the director has consented to receive notice, (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder or the director has consented to receive notice, (iii) if a posting on an electronic network together with a separate notice to the stockholder or the director of such specified posting, upon the later of (A) such posting and (B) the giving of such separate notice and (iv) if by any other form of electronic transmission, when directed to the stockholder or the director.  Notice to directors may also be given by telegram, telecopy, email or orally, by telephone or in person.

(b)

Whenever any notice is required to be given under the provisions of any applicable statute or of the Charter or of these by-laws, a waiver of notice, given by the person or persons entitled to said notice, or a waiver of notice by electronic transmission by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

6.3.

Conflict of Interest .  No contract or transaction between the Company and one or more of its directors or officers, or between the Company and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or board committee that authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if:  (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Company entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of such stockholders; or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved, or ratified, by the Board of Directors, a committee or the stockholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction.

6.4.

Voting of Securities owned by the Company .  Subject always to the specific directions of the Board of Directors, (i) any shares or other securities issued by any other corporation and owned or controlled by the Company may be voted in person at any meeting of security holders of such other corporation by the Chief Executive Officer or the President of the Company if he is present at such meeting, or in his absence by the Treasurer or the Secretary of the Company if he is present at such meeting, and (ii) whenever, in the judgment of the Chief Executive Officer or President, it is desirable for the Company to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by the Company, such proxy or consent shall be executed in the name of the Company by the Chief Executive Officer or President, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer, provided that if the Chief Executive Officer or President is unable to execute such proxy or consent by reason of sickness, absence from the United States or other similar cause, the Treasurer, the Secretary or any other officer authorized by the Board of Directors may execute such proxy or consent.  Any person or persons designated in the manner above stated as the proxy or proxies of the Company shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by the Company the same as such shares or other securities might be voted by the Company.

ARTICLE VII

INDEMNIFICATION

7.1.

Right to Indemnification .  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of being or having been a director or officer of the Company or serving or having served at the request of the Company as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “ Indemnitee ”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than permitted prior thereto) (as used in this Article VII, the “ Delaware Law ”), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee, or agent and shall inure to the benefit of the Indemnitee’s heirs, executors, and administrators; provided, however, that, except as provided in Section 7.2 hereof with respect to Proceedings to enforce rights to indemnification, the Company shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Company.  The right to indemnification conferred in this Article VII shall be a contract right and shall include the right to be paid by the Company the expenses (including attorneys’ fees) incurred in defending any such Proceeding in advance of its final disposition (an “ Advancement of Expenses ”); provided, however, that, if the Delaware Law so requires, an Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the Company of an undertaking (an “ Undertaking ”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “ Final Adjudication ”) that such Indemnitee is not entitled to be indemnified for such expenses under this Article VII or otherwise.

7.2.

Right of Indemnitee to Bring Suit .  If (a) a claim for indemnification under Section 7.1 hereof (following the final disposition of such Proceeding) is not paid in full by the Company within sixty (60) days after a written claim has been received by the Company, or (b) a claim for an Advancement of Expenses under Section 7.1 hereof is not paid in full by the Company within twenty (20) days after the written claim has been received by the Company, the Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim.  If successful in whole or in part in any such suit, or in a suit brought by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit to the fullest extent permitted by law.  In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and (ii) in any suit by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Company shall be entitled to recover such expenses upon a Final Adjudication that, the Indemnitee has not met the applicable standard of conduct set forth in the Delaware Law.  Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.  In any suit brought by the Indemnitee to enforce a right to indemnification or to an Advancement of Expenses hereunder, or by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such Advancement of Expenses, under this Article VII or otherwise shall be on the Company.

7.3.

Non-Exclusivity of Rights .  The rights to indemnification and to the Advancement of Expenses conferred in this Article VII shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, the Charter, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

7.4.

Insurance .  The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under this Article VII or under the Delaware Law.

7.5.

Indemnification of Employees and Agents of the Company .  The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the Advancement of Expenses, to any employee or agent of the Company or any of its subsidiaries to the fullest extent of the provisions of this Article VII with respect to the indemnification and Advancement of Expenses of directors and officers of the Company.

7.6.

Amendment or Repeal .  Any repeal or modification of the provisions of this Article VII shall not adversely affect any right or protection hereunder of any Indemnitee in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VIII

AMENDMENTS

8.1.

Amendments .  The by-laws of the Company may be altered, amended or repealed by the Board of Directors or by the stockholders at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the Charter and the laws of Delaware.




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EXHIBIT 3.4


Industry Canada

Corporations Canada

9th floor

Jean Edmonds Tower South

365 Laurier Avenue West

Ottawa, Ontario K1A 0C8

Industrie Canada

Corporations Canada

9e étage

Tour Jean Edmonds sud

365, avenue Laurier oust

Ottawa (Ontario) K1A 0C8

   



May 12, 2009 / le 12 mai 2009

Your file – Votre référence

Andrew M. Bunston

Borden Ladner Gervais

40 King Street West

Our file – Notre référence

Scotia Plaza

639049-8

Toronto Ontario

M5H 3Y4


Re – Objet

  Oppenheimer Holdings Inc.


Enclosed herewith is the document issued in the above matter.


A notice of issuance of CBCA documents will be published in the Canada Corporations Bulletin.  A notice of issuance of CCA documents will be published in the Canada Corporations Bulletin and the Canada Gazette.


IF A NAME OR CHAGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE OBSERVED:




This name is available for use as a corporate name subject to and conditional upon the applicants assuming full responsibility for any risk of confusion with existing business names and trade marks (including those set out in the relevant NUANS search report(s)).  Acceptance of such responsibility will comprise an obligation to change the name to a dissimilar one in the event that representations are made and established that confusion is likely to occur.  The use of any granted is subject to the laws of the jurisdiction where the company carries on business.

Vous trouverez ci-inclus le document émis dans l’affaire précitée.


Un avis de l’émission de documents en vertu der la LCSA sera publié dans le Bulletin des sociétés canadiennes . Un avis de l’émission de documents en vertu der la LCC sera publié dans le Bulletin des sociétés canadiennes et dans la Gazette du Canada .


S’IL EST QUESTION D’UNE DÉNOMINATION SOCIALE OU D’UN CHANGEMENT DE DÉNOMINATION SOCIALE, L’AVERTISSEMENT SUIVANT DOIT ÊTRE RESPECTÉ:


Cette dénomination sociale est disponible en autant que les requérants assument toute responsabilité de risque de confusion avec toutes dénominations commerciales et toutes marques de commerce existantes (y compris celles qui sont citées dans le(s) rapport(s) de recherches de NUANS pertinent(s)). Cette acceptation de responsabilité comprend l’obligation de changer la dénomination de la société en une dénomination différente advenant le cas où u des représentations sont faites établissant qu’il y a une probabilité de confusion. L’utilisation de tout nom octroyé estsujette a toute loi de la juridiction ou la société exploite son entreprise.


/s/ Marie-Marthe Soulière-Roussel

Marie-Marthe Soulière-Roussel

For the Director General, Corporations Canada

Pour le Directeur general, Corporations Canada




Industry Canada


Certificate of

Discontinuance


Canada Business

Corporations Act




Oppenheimer Holdings Inc.

639049-8


__________________________________

_________________________________

Name of corporation

Corporation number


I hereby certify that the above-named corporation


a)

was discontinued under section 188 of the


Canada Business Corporations Act and

continued under the laws of another

jurisdiction as specified in the attached

notice;


b)

was discontinued under section 188 of the

Canada Business Corporations Act and

continued under the

i)

Bank Act,


ii)

Canada Cooperative Associations Act,


iii)

Insurance Companies Act, or


iv)

Trust and Loans Companies Act,


as specified in the attached notice; or


a)

Was amalgamated pursuant to the

provisions of the

i)

Bank Act,


ii)

Canada Cooperative Associations Act,


iii)

Cooperative Credit Associations Act,


iv)

Insurance Companies Act, or


v)

Trust and Loans Companies Act,


as specified in the attached notice.




___ /s/ Richard Shaw ______________

May 11, 2009

Richard G. Shaw

Date of Discontinuance

Director



EXHIBIT 3.1

CERTIFICATE OF INCORPORATION

OF

OPPENHEIMER HOLDINGS INC.



I, the undersigned, for the purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware (the “DGCL”), do execute this Certificate of Incorporation and do hereby certify as follows:


Article I


The name of the Corporation is Oppenheimer Holdings Inc. (the “Corporation”).


Article II


The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400 in the City of Wilmington, County of New Castle County.  The registered agent in charge thereof is Corporation Service Company.


Article III


The nature of the business and purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.


Article IV


The total number of shares of all classes of stock which the Corporation shall have authority to issue is 100,099,680 shares, consisting solely of:


50,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”);


50,000,000 shares of Class A Non-Voting Common Stock, par value $0.001 per share (the “Class A Common Stock”); and


99,680 shares of Class B Voting Common Stock, par value $0.001 per share (the “Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”).


Upon the effectiveness of the Certificate of Corporate Domestication of Oppenheimer Holdings Inc., a Canadian corporation, and this Certificate of Incorporation (the “Effective Time”), (i) each Class A non-voting share, no par value, of Oppenheimer Holdings Inc., a Canadian corporation, issued and outstanding immediately prior to the Effective Time will for all purposes be deemed to be one issued and outstanding, fully paid and nonassessable share of Class A Common Stock, without any action required on the part of the Corporation or the holders thereof and (ii) each Class B voting share, no par value, of Oppenheimer Holdings Inc., a Canadian corporation, issued and outstanding immediately prior to the Effective Time will for all purposes be deemed to be one issued and outstanding, fully paid and nonassessable share of Class B Common Stock, without any action required on the part of the Corporation or the holders thereof.  Any stock certificate that, immediately prior to the Effective Time, represented Class A non-voting shares or Class B voting shares of Oppenheimer Holdings Inc., a Canadian corporation, will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the same number of shares of the Class A Common Stock or Class B Common Stock, as applicable.


The following is a statement of the powers, designations, preferences, relative rights, qualifications, limitations, and restrictions in respect of each class of capital stock of the Corporation.


A.

COMMON STOCK .


1.

General .  The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights of the holders of Preferred Stock.


2.

Voting .  The holders of Class B Common Stock are entitled to one vote for each share held as of the record date for each meeting of stockholders.  Except as expressly provided herein or as required by law, the holders of Class A Common Stock will have the same powers, rights, and preferences as, and will rank equally and share proportionately with, and be identical in all respects as to all matters to, the Class B Common Stock, including the right to attend stockholders meetings and receive informational distributions from the Corporation with respect to such meetings; provided, however, that the holders of Class A Common Stock will have no voting rights other than those voting rights required by law. There shall be no cumulative voting.


3.

Dividends .  Dividends may be declared and paid on the Common Stock from funds lawfully available therefor if, as and when determined by the board of directors of the Corporation (the “Board of Directors”) and subject to any preferential dividend rights of any then outstanding shares of Preferred Stock.


B.

PREFERRED STOCK .


Preferred Stock may be issued from time to time in one or more series.  The Board is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any such series.  The Board is also authorized to determine or alter the powers, rights, preferences, qualifications, restrictions, and limitations granted to or imposed upon any wholly unissued series of Preferred Stock and, within the limits and restrictions stated in any resolution or resolutions of the Board originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series.


C.

GENERAL .


The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding stock of the Corporation entitled to vote.




Article V


The name and mailing address of the incorporator are as follows:


Name

Address


Dennis McNamara

Oppenheimer Holdings Inc.

125 Broad Street

New York, NY 10004


Article VI


No director of the Corporation shall be personally liable to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability; provided , however , that to the extent required from time to time by applicable law, this Article VI shall not eliminate or limit the liability of a director, to the extent such liability is provided by applicable law, (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transactions from which the director derived an improper personal benefit.  If the DGCL hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL.  No amendment to or repeal of this Article VI shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to the effective date of such amendment or repeal.


Article VII


Any action required or permitted to be taken by the stockholders of the Corporation may be taken only at a duly called annual or special meeting of the stockholders, and no action may be taken by the written consent of stockholders.  


Article VIII


In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board is expressly authorized to make, alter and repeal the by-laws of the Corporation.


Article IX

  

The powers of the incorporator are to terminate upon the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware.  The name and mailing address of the persons who are to serve as the initial directors of the Corporation until the annual meeting of stockholders of the Corporation following the filing of this Certificate of Incorporation, or until his or her successor is duly elected and qualified, are: J.L. Bitove, R. Crystal, W. Ehrhardt, M.A.M. Keehner, A.G. Lowenthal, K.W. McArthur, A.W. Oughtred, E.K. Roberts, and B. Winberg c/o Oppenheimer Holdings Inc., P.O. Box 2015, Suite 1110, 20 Eglinton Avenue West, Toronto, Ontario, Canada M4R 1K8.



The effective time of this Certificate of Incorporation shall be 2pm Eastern time on May 11, 2009.






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The undersigned incorporator hereby acknowledges that the foregoing certificate of incorporation is his act and deed on this 8th day of May, 2009.





By:


       Name:  Dennis McNamara

       Title:    Incorporator






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