Articles Tagged with Berthel Fisher

shutterstock_120115444-300x198Current Berthel, Fisher & Company Financial Services, Inc. (Berthel Fisher) broker Jonathan Pyne (Pyne) has been subject to five customer complaints.  According to a BrokerCheck provided by The Financial Industry Regulatory Authority (FINRA), the primary regulator for securities broker dealers, many of the complaints concern alternative investments.  Alternative investments include a group of speculative securities such as non-traded real estate investment trusts (Non-Traded REITs), oil & gas programs, equipment leasing, and other direct participation programs.  Our firm has experience handling investor losses caused by these products.

In July 2017 a customer filed a complaint trying to redeem her investment and is alleging that she was misled by the representative into purchasing an investment that she didn’t know was illiquid.  The claim is currently pending.

In September 2016 another customer filed a complaint alleging that the investments she purchased in 2008 and 2009 were unsuitable and misrepresented to her by the representative.  The claim was settled for $48,175.

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shutterstock_183554579-300x200Our firm is investigating claims made by various regulators and brokerage firms including Axiom Capital Management, Inc. (Axiom) and Financial West Group (FWG) concerning broker Sara Eng (Eng a/k/a Sara Aiping Ng).  Eng is currently associated with brokerage firm Moloney Securities Co., Inc. (Moloney).

The allegations revolve around Eng’s offering of investments to clients.  In October 2015, FWG terminated Eng for cause and allowed Eng to voluntarily resign after allegations were made that   Eng was being placed on heightened supervision for potential violation of firm policy regarding marketing of investments to firm customers.  Thereafter, in September 2016, Axiom terminated Eng for cause for violation of the firm’s policies and procedures regarding email correspondence.  At the same time The Financial Industry Regulatory Authority’s (FINRA) opened its own investigation into Eng concerning Axiom’s disclosures for Eng’s termination.  At this time it is unclear the exact nature and extent of the investigation.

Eng entered the securities industry in 1997.  From November 2002 until March 2014, Eng was associated with Berthel, Fisher & Company Financial Services, Inc.  From February 2014 until November 2015, Eng was associated with FWG.  From October 2015 until September 2016, Eng was registered with Axiom.  Finally, since November 2016 Eng  has been registered with Moloney out of the firm’s Oak Brook, Illinois and Flushing, New York office locations.

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shutterstock_62862913Our firm is investigating claims made by VisionPoint Advisory Group, LLC and LPL Financial LLC (LPL) against broker Vincent Sturm (Sturm).  According to the two firms Sturm was discharged in August 2016 after allegation were made that Sturm violated firm policies by soliciting loans.  VisionPoint stated that no funds were received by Sturm and the loan was not made.  No other details concerning this activity were reported.

According to Sturm’s brokercheck records Sturm disclosed an outside business activity – Generations Wealth Advisors.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.

Sturm entered the securities industry in 1998.  From January 2009 through March 2011 Sturm was associated with Securities America, Inc.  From February 2011 until December 2013, Sturm was registered with Broker Dealer Financial Services Corp.  Thereafter, from November 2013 until February 2016 Sturm was associated with InvestaCorp, Inc.  From January 2016 until August 2016, Sturm was associated with LPL.  Finally, since September 2016, Sturm has been registered with Berthel, Fisher & Company Financial Services, Inc. out of the firm’s Perry, Iowa office location.

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shutterstock_52426963The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Donald Levin (Levin) (FINRA No. 2014040335101) alleging that between December and April 2014, Levin hosted a weekly radio show and during that show he made statements that were unbalanced, promissory, misleading and lacked reasonable basis in violation of the FINRA Rules. According to Levin’s BrokerCheck records Levin also has a long and troubled history of customer complaints, regulatory actions, and employment separations. In September 2012, FINRA accepted an settlement with Levin where he accepted the entry of findings that Levin made unwarranted and misleading statements on his weekly radio show. At that time Levin agreed to accept a five month suspension and a $30.000 fine. Going back to December 2008, the Securities and Exchange Commission (SEC) issued a cease and desist order to Levin fining him $25,000 for his violations in the offering and selling mutual fund class A shares to retail customers without adequate disclosure of material information about the availability of breakpoint discounts for which customers could have qualified.

In addition to the regulatory actions, Levin has approximately 15 customer complaints filed against him dating back to 1999. The customer complaints allege a host of securities laws violations concerning a variety of investment products. Some of the more recent complaints allege that Levin failed to conduct due diligence in private placement securities some of which include oil & gas private placements. In another customer complaint, the customer alleged that he was induced to take out a home equity loan in order to purchase securities and suffered losses of $440,000 as a result. Other investor complaints involve alternative investments and mutual funds.

Levin first became associated with a FINRA member in 1980. From 2004 until June 2012, Levin was a registered representative of Milkie/Ferguson Investments, Inc. Thereafter, from June 2012, until September 2012, Levin was associated with Berthel, Fisher & Company Financial Services, Inc. Finally, from January 2014, unitl August 2014, Levin was a registered representative of Titan Securities.

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shutterstock_187532306According to the records kept by the State of Florida, Office of Financial Regulation brokerage firm J.P. Turner & Company, L.L.C., (JP Turner) was sanctioned (Administrative Proceeding: 0757-S-12/13) concerning allegations that the firm’s broker, John McGriskin (McGriskin) engaged in mutual fund switching, a form of churning, in client accounts.

From December 2002, until May 9, 2013, McGriskin was an associated person of JP Turner and worked out of the branch located in Palm Coast, Florida, in his home. According to Florida, McGriskin typically purchased Class A shares for his clients. Class A shares of mutual funds come with high front-end sales charges. Florida found that McGriskin sold Class A shares of one mutual fund company and used the proceeds to purchase Class A shares of another mutual fund company resulting in McGriskin’s clients being subject to additional front-end sales charges on those transactions.

In addition, many mutual fund families offer “breakpoint” discounts for total investment amounts equaling certain minimum thresholds across multiple funds with the same fund family. However, Florida found that McGriskin made six mutual fund switching transactions which were not in the same mutual fund family or issuer from August through December of 2010, thirty-six mutual fund switching transactions which were not in the same mutual fund family or issuer in 2011, thirty-seven mutual fund switching transactions which were not in the same mutual fund family or issuer in 2012, and thirty-six mutual fund switching transactions which were not in the same mutual fund family or issuer from January through May of 2013.

In total, Florida alleged that McGriskin made approximately 115 switching transactions which were not in the same mutual fund family or issuer from August 2010 through May 2013. On May 9, 2013, McGriskin resigned from JP Turner while under internal review for questionable mutual fund trading activity. Because of this activity, Florida found that JP Turner failed to supervise McGriskin’s trading activity during this period.

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shutterstock_175000886According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker John Notman (Notman) has been the subject to an astonishing 31 customer complaints along with two firm terminations for cause. The customer complaints against Notman allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations and false statements among other claims. Many of the complaints involve Notman’s sales of tenants-in-common (TICs). These claims along alleged combined investor losses of well over $20,000,000.

Notman entered the securities industry in 1982. From March 2003, until September 2012, Notman was registered with Berthel, Fisher & Company Financial Services, Inc (Berthel Fisher). In September 2012, Berthel Fisher filed a notice of termination Form U-5 stating that the reason for terminating Notman from the firm was due to his failure to report certain financial disclosures.

As a background, TICs largely been sold unfairly as tax advantaged products that allow customers to defer capital gains taxes on appreciated real estate. TICs are private placements that have no secondary trading market and are therefore illiquid investments. 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. 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. Because these fees are often higher than 15%, there is often no way for the investment to be profitable for the investor.

TICs have come under fire by many investors and due to the failure of the TICs as a whole across the securities industry. Indeed, TICs have virtually disappeared as offered investments.   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.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.

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shutterstock_24531604According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Jerry McCutchen (McCutchen) has been the subject of at least 15 customer complaints and one judgment or lien. The customer complaints against McCutchen allege a number of securities law violations including that the broker made unsuitable investments, negligence, and misrepresentations among other claims.

The claims against McCutchen involve various investments including equipment leasing, non-traded real estate investment trusts (Non-Traded REITs), and variable annuities. We have written many times about the investing dangers of these products. One quality all of these investments have in common is the fact that they come with high commissions for the broker and low probability of success for the client. Our firm has written numerous times about investor losses in these programs such as equipment leasing programs like LEAF Equipment Leasing Income Funds I-IV and ICON Leasing Funds Eleven and Twelve. The costs and fees associated with all of these investments cause the security to be so costly that significant returns are virtual impossibility. Yet, investors are in no way compensated for the additional risks of these products.

In a typical equipment leasing program upfront fees are around 20-25% of investor’s capital. As for Non-Traded REITs, it was reported in the Wall Street Journal, that a study on “Nontraded REITs are costing investors, especially elderly, retired, unsophisticated investors, billions. They’re suffering illiquidity and ignorance, and earning much less than what they ought to be earning.” In conclusion, “No brokerage should be allowed to sell these things.”

According the analysis, shareholders have lost about $50 billion for having put money into Non-Traded REITs rather than publicly exchange-traded funds. The study found that the average annual rate of return of Non-Traded REITs was 5.2%, compared with 11.9% for the Vanguard REIT Index Fund, a publicly traded REIT index.

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shutterstock_175320083The investor advocacy bar association PIABA (the Public Investors Arbitration Bar Association) has recently issued a report called “Major Investor Losses Due to Conflicted Advice: Brokerage Industry Advertising Creates the Illusion of Fiduciary Duty.” The PIABA report argues that the brokerage industry uses false advertising to convey to investors that the firms have a fiduciary duty to their clients only then to do a 180 turn when sued to claim that no such duty exists.

According to the report, some of the largest firms in the United States are falsely advertise in this fashion including Merrill Lynch, Wells Fargo, Morgan Stanley, UBS, Fidelity, Ameriprise, Allstate Financial, Berthel Fisher, and Charles Schwab. The report claimed that all of these firms “advertise in a fashion that is designed to lull investors into the belief that they are being offered the services of a fiduciary.”

In the wake of the financial crisis of 2008, the Dodd-Frank legislation authorized the Securities Exchange Commission (SEC) to pass a fiduciary duty rule that would apply to brokers, as opposed to only financial advisors. Most investors do not realize and are usually shocked to learn that there broker only has an obligation to recommend “suitable” investments, and not to work in their client’s best interests. Currently, the fiduciary duty rule only applies to financial advisors (and brokers under certain circumstances).

The fact that the investing public has absolutely no clue how crucial the fiduciary duty is to protecting their retirement futures and holding Wall Street accountable for mishaps has prevented any serious public debate to combat the millions of dollars the industry has and will spend to kill this part of the law. However, recently President Obama has brought this issue to the public’s attention through his support of the Department of Labor to move ahead with a proposal to impose a fiduciary standard on retirement accounts.

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shutterstock_175000886The law offices of Gana LLP are investigating a series of claims before The Financial Industry Regulatory Authority (FINRA) in relation to the conduct of financial advisor Robert Smith (Smith). Smith has been accused by at least 10 customers over his career concerning allegations that Smith overconcentrated the customer’s accounts in private placement securities including equipment leasing programs, oil & gas investments, and non-traded real estate investment trusts (Non-traded REITs).

Smith has been registered with several broker dealers over the years. Starting in 2000 Smith was registered with American General Securities (n/k/a SagePoint Financial, Inc.) until May 2006. Thereafter, Smith was associated with ProEquities, Inc. until June 2010. Finally, from June 2010, until June 2014, Smith was registered with Berthel, Fisher & Company Financial Services, Inc. (Berthel Fisher). Currently, Smith is not registered with any FINRA firm. Upon information and belief, from 2006 on Smith operated his securities business under a DBA called Proactive Retirement Investing.

The large number of complaints against Smith concerning the same or similar charges of misconduct is unusual in the brokerage industry. Most brokers go their entire careers without a single complaint. A small number have one or two complaints. But only a tiny percentage have more than two customer complaints. Here, at least 10 customers have made allegations against Smith all concerning difficult to value private placement securities.

The types of products Smith recommended do immediately appear to be inappropriate to the investor. In oil & gas, Non-Traded REIT, and equipment leasing programs the investor often receives a stream of income for a number of years, maybe as much as 5 to 7 years before something goes wrong. All of sudden the income stops or the interest payments are lowered substantially. Only then does the investor learn that product is not expected to return the investor’s principal for a variety of reasons depending upon the product. These income paying securities lull investors into a false sense of security because they initially receive a stream of income and belief the investments are viable.

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shutterstock_120556300On August 27, 2014, FINRA filed a complaint against Steven L. Stahler, formerly a registered representative with multiple broker dealers including Lowell & Company, Inc., Ausdal Financial Partners, Inc., Berthel, Fisher & Company Financial Services, Inc., VSR Financial Services, Inc., among others. On November 1, 2013, Lowell & Company terminated Mr. Stahler according to his form U5.

FINRA alleges that Mr. Stahler made unsuitable recommendations to customers in violation of FINRA Rule 2310 and 2110 and FINRA Rule 2010.  Under FINRA Rule 2110 and 2310, all financial advisers and brokerage firms have a responsibility to deal fairly with their customers. All sales efforts are judged based upon the standards outlined in the FINRA Rules. Furthermore, all brokers must recommend the purchase, sale or exchange of securities that are reasonable given the customers investment objectives and risk tolerances.

According to the complaint, VSR Financial’s written supervisory procedures specify that no more than 40%-50% of a customer’s liquid net worth should be invested in alternative investments. VSR’s guidelines also required that new account forms used outline the customer’s percentage of the portfolio they would feel comfortable investing in high risk investments. FINRA alleges that from September 13, 2006 through October 24, 2006, Mr. Stahler recommended that a married couple, who had stated that no more than twenty percent of their portfolio be invested in aggressive/high risk investments, invested approximately $837,000 in twelve high risk investments at Mr. Stahler’s recommendation. These alternative investments included:

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