Berthel, Fisher and Co.: Complaints and Regulatory Actions

The White Law Group reviews the regulatory history of Berthel, Fisher and Company Financial Services.  

The following is a review of publicly available information regarding Berthel, Fisher and Company and its securities sales practices and FINRA regulatory history. FINRA is the self-regulator that oversees brokers and brokerage firms. 

Berthel, Fisher and Company Financial Services Inc. (CRD#: 13609) is a FINRA registered broker-dealer based in Cedar Rapids, Iowa. Although Berthel, Fisher has a solid reputation in the securities industry, investors should know that the firm does have numerous reportable events on its FINRA Broker Report (or CRD).  

Berthel Fisher has $32.1 Million in Pending Claims

This week, Investment News reported that at the end of last year Berthel, Fisher had $32.1 Million in pending claims, eight times what they had the previous year. The firm has been known to offer a variety of high risk, alternative investments, which could explain the excessive number of investor complaints. 

According to the firm’s CRD, Berthel, Fisher and Co. has been named in at least 27 regulatory events related to possible securities fraud violations. 

The firm has been the subject of investigations conducted by FINRA, the Missouri Securities Division, the Nebraska Department of Banking and Finance, and the State of North Dakota (among others).  These regulatory investigations involved the following alternative investment products: options, real estate investment trusts (REITs), limited partnerships and other direct investments, and variable annuities. 

The firm has also been named in 14 FINRA arbitration claims filed by investors.  These claims involved various investment types and causes of action. 

Arbitrations on a broker-dealers CRD (Central Registration Depository) refer to the resolution of disputes between a broker-dealer and a client or between broker-dealers themselves through the FINRA arbitration process. When a client or another broker-dealer files a complaint against a broker-dealer, the complaint may be resolved through arbitration, which is a process where an independent third party (the arbitrator) hears both sides of the dispute and makes a binding decision. 

Berthel Fisher – Broker Misconduct and Customer Complaints 

There have been several cases of registered representatives employed by Berthel, Fisher and Company who were allegedly involved in broker misconduct and fraudulent activities.  

FINRA reportedly suspended Mason Gann in January 2020, according to a Letter of Acceptance, Wavier and Consent. Gann allegedly recommended and effected a risky options-trading strategy in the account of a retiree and senior investor who had limited income, modest retirement savings, and minimal investment knowledge. According to FINRA, Gann reportedly lacked a reasonable basis for believing that his options recommendations were suitable for the customer, given what Gann purportedly knew about the customer’s investment profile. 

According to his FINRA BrokerCheck report, Gann was registered with Berthel, Fisher & Company in Dallas, Texas from 2012 through 2018. He has four customer complaints on his record. Allegations include “unsuitable and risky investments,” among others. 

This was not Gann’s first brush with regulators—FINRA reportedly also suspended him in 2018 after he purportedly exercised discretion in six customers’ accounts without obtaining prior written authorization from the customers or prior written approval from his member firm. The findings reportedly stated that these six customers verbally approved of Gann’s use of discretion to buy and sell securities in their accounts, but allegedly did not provide written authorization to do so. 

Despite not having the necessary written authorizations or firm approval, Gann purportedly used his discretion to make approximately 500 trades in the affected customers’ accounts. 

FINRA Sanctions Berthel Fisher for Failure to Supervise

We have previously reported several regulatory actions that FINRA has taken against Berthel Fisher and Company in the past few years.  

In 2017, FINRA charged Berthel, Fisher with failure to supervise a registered representative’s sale of unit investment trusts (UITs). The charges include structuring sales from 2013 to 2014 of UITs to clients in order to allegedly avoid reaching levels at which breakpoint discounts would kick in, thus increasing the broker’s commission, and at the same time harming clients. 

According to FINRA, Berthel, Fischer discharged the broker in September, stating they believed he did not adhere to a term of his heightened supervision agreement, which required him to run all business, including fixed indexed annuities, through the firm’s commission grid. 

The FINRA complaint alleges the representative generated more than $421,000 in commissions for himself and Berthel, Fisher, by recommending short-term trading of the UITs, inconsistent with the buy and hold design of the products and requiring clients to pay heavy sales charges. 

Mutual Fund Overcharges 

The Securities and Exchange Commission settled charges with Berthel Fisher & Company over claims it failed to disclose conflicts concerning recommendations of certain mutual fund share classes that included 12b-1 fees. The firm was censured and fined $235,000 plus more than $150,000 in disgorgement and pre judgment interest. 

Registered representatives at Berthel Fisher, beginning in 2014, allegedly received 12b-1 fees from mutual fund share classes it recommended or purchased for clients, even when more affordable share classes from the same mutual funds were available, according to the order. The firm also purportedly failed to disclose the inherent conflicts.  

Risky Options Trading 

Again, FINRA censured and fined Berthel, Fisher & Co. — this time, $100,000.  

In August 2015, when reviewing a customer’s request for approval to trade options in his brokerage account, Berthel, Fisher allegedly failed to exercise due diligence to ascertain the customer’s investment experience and knowledge, according to an AWC.  

Between August 2015 and February 2018, one of the firm’s brokers purportedly recommended options transactions to the same customer without having reasonable grounds for believing that the transactions were suitable for that customer. At the same time, Berthel Fisher reportedly failed to establish and maintain a supervisory system, including written procedures, reasonably designed to achieve compliance with FINRA’s rules pertaining to the suitability of options trading in customer accounts. The firm also allegedly failed to enforce multiple provisions of its written supervisory procedures pertaining to options trading. 

FINRA Rule 3110 Supervision 

The Financial Industry Regulatory Authority (FINRA) has several rules in place to regulate broker-dealers, including the FINRA Rule 3110 Supervision rule. This rule requires broker-dealer firms to establish and maintain a system to supervise the activities of their associated persons (e.g., brokers) to ensure that they comply with securities laws and regulations. 

Under this rule, broker-dealers are required to: 

-Designate an appropriately qualified supervisor who is responsible for the supervision system.
-Develop written supervisory procedures (WSPs) that are reasonably designed to achieve compliance with applicable securities laws and regulations, as well as FINRA rules.
-Implement the WSPs effectively and ensure that they are followed by all associated persons.
-Conduct regular reviews of the system to ensure that it is adequate and effective. 

FINRA Rule 3110 also requires that broker-dealers establish a process for identifying and responding to red flags that may indicate potential violations or misconduct by associated persons. This includes conducting periodic reviews of customer accounts and transactions, as well as monitoring communications (e.g., email, social media) to detect potential violations. 

FINRA BrokerCheck 

To access Berthel Fisher’s full CRD, you can visit http://brokercheck.finra.org. 

FINRA BrokerCheck is a free online tool that allows investors to research the background and professional history of brokers, brokerage firms, and investment advisors. The Financial Industry Regulatory Authority (FINRA) operates BrokerCheck and it provides valuable information to help investors make informed decisions before working with a financial professional. 

With BrokerCheck, you can find out if a broker or firm is registered, if they have any regulatory actions or complaints against them, and if they have disclosed any bankruptcies, criminal convictions, or other red flags. BrokerCheck also provides information on a broker’s education, qualifications, and employment history, as well as any disclosures related to arbitration or civil litigation. 

To use BrokerCheck, simply enter the name or registration number of a broker or firm in the search box on the FINRA website. You can also search for brokers and firms by location or by specific products they offer. Once you have found the broker or firm you are interested in, you can view their profile and review any available information about their background and history. 

Hiring a Securities Attorney

If you have any questions about investments you made with Berthel Fisher, or if you believe that you have been the victim of securities fraud, The White Law Group may be able to help.  To contact the firm, please call 888-637-5510 

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.       

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.        

With over 30 years of securities law experience The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.        

Although our offices are in Seattle, Washington and Chicago, Illinois, the firm reviews securities fraud cases throughout the country. For more information on The White Law Group, please visit http://whitesecuritieslaw.com.