Regulator fines Marion financial services firm $775,000

Berthel Fisher and affiliate penalized for regulatory issues

George Ford
Published: February 24 2014 | 4:09 pm - Updated: 29 March 2014 | 4:06 am in

Berthel Fisher & Co. Financial Services of Marion and its affiliate, Securities Management & Research, have been fined a combined total of $775,000 by a regulator.

The Financial Industry Regulatory Authority (FINRA) said Berthel Fisher and its affiliate failed to provide appropriate supervision of the sale of non-traded real estate investment trusts (REITs)  and leveraged and inverse exchange-traded funds (ETFs).

As part of the settlement, Berthel Fisher must retain an independent consultant to improve its supervisory procedures relating to its sale of alternative investments.

Specifically, FINRA found that from January 2008 to December 2012, Berthel Fisher had inadequate supervisory systems and written procedures for sales of alternative investments such as non-traded REITs, managed futures, oil and gas programs, equipment leasing programs and business development companies.

In some cases, FINRA said the company failed to accurately calculate concentration levels for alternative investments, so it did not correctly enforce suitability standards for a number of the sales of these investments.

FINRA said Berthel Fisher also failed to train its staff on individual state suitability standards, which is part of the suitability review for certain alternative investment sales.

The regulator also found that from April 2009 to April 2012, Berthel Fisher did not have a reasonable basis for certain sales of leveraged and inverse ETFs. FINRA said the company did not adequately research or review non-traditional ETFs before allowing its registered representatives to recommend them to customers, and failed to provide training to its sales force regarding these products.

FINRA said Berthel Fisher also failed to monitor the holding periods of these investments by customers, resulting in some instances of customer losses.

In settling the matter with FINRA, Berthel Fisher and Securities Management & Research neither admitted nor denied the charges.

"As a nearly 30-year-old mid-sized broker-dealer that works primarily with independent registered representatives throughout the country, Berthel Fisher recognizes that there is always room for improvement in an ever-changing, highly regulated industry such as ours," said in a statement issued in response to the FINRA announcement.

"Like many broker dealers, we have had some regulatory issues over the past 30 years. We take those issues very seriously and work very hard to meet our regulatory obligations and the obligations to our customers."

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