Category Archives: Berthel Fisher News

FINRA Fines Berthel Fisher Over Non-Traded REIT and Inverse ETF Sales

The Financial Industry Regulatory Authority (FINRA) recently fined broker-dealer firm Berthel Fisher & Company Financial Services, Inc. (Berthel Fisher) and its affiliate, Securities Management & Research, Inc. (Securities Management) $775,000 for supervisory deficiencies. This came as Berthel Fisher and Securities Management failed to supervise sales of non-traded real estate investment trusts (REITs) and leveraged and inverse exchange-traded funds (ETFs) by their registered representatives.

The questionable sales activity took place from January 2008 to December 2012. FINRA discovered that the firms did not have adequate supervisory systems and written procedures in place for sales of the following alternative investment products: non-traded REITs, managed futures, oil and gas programs, equipment leasing programs and business development companies.

In some instances, the firms also failed to either accurately calculate concentration levels for these investments or correctly enforce suitability standards.

Additional questions arose around the sales of leverage and inverse ETFs during the period of April 2009 to April 2012. According to FINRA, Berthel Fisher did not have a “reasonable basis” for certain investment sales and it also did not “adequately” research or review non-traditional ETFs before allowing its registered representatives to make customer recommendations.

Blau & Malmfeldt invites Berthel Fisher customers to contact us at 312-443-1600 for a complimentary case evaluation.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.

Former LPL, Berthel Fisher, and Morgan Stanley Broker James Scott McKee Pleads Guilty to Securities Fraud

On October 25, 2013, former securities broker James Scott McKee  pled guilty to nine counts of aggravated theft and securities fraud in connection with a string of customer funds thefts between 2008 and 2010.

The Financial Industry Regulatory Authority (FINRA) previously banned McKee from working in the securities industry effective October 11, 2012.  According to McKee’s FINRA records, he improperly induced customers to invest in outside real estate ventures, and embezzled money from customer accounts to pay off past investors and personal expenses.  In one case, McKee recommended that a church invest $100,000 in a risky startup real estate venture.  McKee forged company documents, including suitability and disclosure reports to further his scheme.

In June 2013, 19 investors who have suffered losses as a result of McKee’s apparent wrongdoing filed a lawsuit against Steve Master and the companies Master owns seeking $2.5 million in damages.  The lawsuit claims that Master and his companies benefited from McKee’s scheme and are therefore liable for their losses.

McKee was a registered representative of the following broker-dealer firms:  LPL Financial Corporation, Eugene, OR (11/2002 – 09/2008); Berthel, Fisher & Company Financial Services, Inc., Springfield, OR (09/2008 – 11/2010); and, Morgan Stanley Smith Barney, Eugene, OR (12/2010 – 10/2011).

Brokerage firms are required to enforce supervisory systems reasonably calculated to ensure that their brokers are acting in compliance with all applicable rules and regulations.  It appears that McKee’s former broker-dealer firms may have failed in this respect.  It is possible that McKee’s customers may be able to recover their losses by pursuing claims against these firms for their supervisory failures through arbitration at FINRA Dispute Resolution.

FINRA records show a total of 19 customer complaints have been filed against McKee’s former brokerage firms in connection with his wrongdoing.  FINRA records show that some of these arbitration claims have resulted in substantial settlements.

Former customers of McKee are encouraged to contact the law firm of Blau & Malmfeldt at 312-443-1600 to discuss recovery options.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.