Broker Scott Barcomb Subject to Complaints Over Private Placements

shutterstock_182371613-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Berthel, Fisher & Company Financial Services, Inc. (Berthel, Fisher & Company) broker Scott Barcomb (Barcomb). According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), Barcomb has been subject to four customer disputes concerning unsuitable variable annuity recommendations and failure to conduct due diligence on private placement investments.  In addition, Barcomb has been subject to one criminal action.

In August 2010, a customer alleged that Barcomb failed to disclose taxes involved in disbursements from a 1035 contract. The case settled for $20,000 in damages.

In June 2010, a customer alleged that Barcomb and his member firm did not properly conduct due diligence on the tenant-in-common (TIC) property that they had recommended to their customers and invested their customers in. This dispute was settled for $200,000.

In November 2006, a customer alleged that Barcomb had unsuitably advised her to sell a variable annuity to fund the purchase of another variable annuity. The dispute settled at $10,000.

TICs are private placements are illiquid investments that have no secondary trading market. In a typical TIC, the investor receives a fractional interest in the property along with other stakeholders and the profits are generated mostly through the efforts of the sponsor and the management company that manages and leases the property. These products allow the investor to defer taxes on appreciated real property as appropriate section 1031 exchanges.  However, they also entail high risks. A TIC investor runs the risk of holding the property for a significant amount of time and that subsequent sales of the property may occur at a discount to the value of the real property interest. The sponsor typically structures the TIC investment with up-front fees and expenses charged to the TIC and negotiates the sale price and loan for the acquired property. FINRA has warned that the TIC product costs (taxes and fees) may outweigh any potential investment value or tax benefit offered to the customer.

TIC investments have led to devastating investor losses and are in almost all cases unsuitable products. The near certainty of failure of investing in TICs as a whole has led to the product virtually disappearing as an offered investment from most reputable brokerage firms.   According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs. TICs now are all but extinct because of the fallout from the credit crisis.” The securities industry has implicitly acknowledged that the costs, fees, and risks associated with TIC investments outweigh any potential tax deferral benefit, as illustrated in the declining sales of these products and securities industry’s increasing refusal to sell them to investors.

Barcomb entered the industry in 1985 and has been registered with Berthel, Fisher & Company since 2003. From August 2000 to March 2003, Barcomb was registered with Continental Capital Investment Services, Inc. From October 1999 to June 2000, Barcomb was a registered representative with Tower Equities, Inc. which was expelled by FINRA in 2014.

Investors who have suffered losses may be able recover their losses through securities arbitration.  The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of brokerage firms failure to supervise their representatives.  Our consultations are free of charge and the firm is only compensated if you recover