Berthel Fisher censured and fined $675,000 over alts sales

The Financial Industry Regulatory Authority Inc. has censured Berthel Fisher & Co. and fined it $675,000 over sales of nontraded REITs, nontraditional ETFs and other alternative investments.

Finra said the firm had inadequate supervisory systems and written procedures, including those concerning its suitability review of transactions in those areas. In a letter of acceptance, waiver and consent, Finra said that Berthel Fisher agreed to payment of restitution to customers in the total amount of $13,292.53.

Specifically, Finra said that in 2013 and 2014, a broker with the firm, Jeffrey Dragon, recommended to 12 customers — many of whom were seniors, unsophisticated investors or both — that they liquidate positions in unit investment trusts that they had held for only a few months, and which they had purchased on Mr. Dragon’s recommendations. He then recommended that they use the proceeds to purchase other UITs. Because each of those purchases carried a new sales load, and because UITs are not designed to be actively traded, Finra said that Mr. Dragon’s recommendations were excessive and unsuitable and that Berthel Fisher not only allowed this activity to occur but profited from it as a direct result of its inadequate system for supervising UIT trading.

This past January, Finra suspended Mr. Dragon for 21 months and fined him $50,000.

Related Topics: Financial Industry Regulatory Authority