FINRA Sues Berthel Fisher and Jeffrey Dragon, former advisor
According to reports, FINRA is charging Berthel Fisher with failure to supervise sales of unit investment trusts. The company, which has 350 representatives operating in 230 branch offices, is being sued along with its former broker, Jeffrey Dragon.
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 Dragon 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 Dragon 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 also requiring clients to pay heavy sales charges.
Specifically, he recommended to twelve clients, many of whom were seniors and unsophisticated investors that they liquidate UIT positions that they had held for only a few months, and which they had purchased on Dragon’s advice, and then use the proceeds to purchase other UITs, according to FINRA. Nearly all of the UITs at issue carried sales charges totaling 3.95% before available discounts.
A UIT is a type of fund that is a mix between an actively managed fund and a fixed portfolio of income-producing securities that is purchased and held to maturity. UITs typically issue redeemable securities, or units, like a mutual fund, which means that the UIT will buy back an investor’s units, at the investor’s request, at their approximate net asset value, according to the Securities and Exchange Commission.
This is not the first time Berthel Fisher has been in hot water. Three years ago, FINRA fined Berthel Fisher and an affiliate firm, a massive $775,000 for a variety of failures to supervise sales of nontraded REITs and leveraged exchange-traded funds that took place from 2008 to 2012.
Failure to Supervise
Brokers have a fiduciary duty to make investment recommendations that are consistent with the clients net worth, investment experience and objectives. Risk tolerance, age, and liquidity needs also need to be considered. Furthermore, brokers are prohibited from engaging in underhanded businesses practice, like churning or unauthorized trading, that violate securities laws and regulations.
When brokers abuse client accounts and conduct transactions that violate securities laws, the brokerage firm they are working with may be liable for investment losses. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
If you suffered losses investing with Jeffrey Dragon or Berthel Fisher, the attorneys of The White Law Group may be able to help you recover your losses. For a free consultation with a securities attorney, please call 888-637-5510.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, visit www.WhiteSecurtiesLaw.com.