The Financial Industry Regulatory Authority (FINRA) recently fined the independent broker-dealer Berthel Fisher & Co. Financial Services Inc. and one of its affiliates $775,000 for compliance failures. According to FINRA, Berthel Fisher failed to supervise the sale of alternative investments, including non-traded real estate investment trusts (REITs) and leveraged and inverse exchange-traded funds (ETFs).
The alternative investments at issue included managed futures, oil and gas investments, equipment leasing programs, and business development companies. These complex products are subject to strong compliance and supervision standards, which FINRA determined Berthel Fisher failed to meet. FINRA requires broker-dealers to ensure their registered representatives understand the risks and suitability standards of these products before selling them to customers.
Berthel Fisher consented to the entry of FINRA’s findings, but it neither admitted nor denied the charges. In addition to paying the $775,000 fine, Berthel Fisher must retain an independent consultant to improve its supervisory procedures.
This is just one example of many where a brokerage firm has been fined for failing to supervise and selling unsuitable investments and securities to unsuspecting clients. Shustak Reynolds & Partners, P.C. handles a wide range of securities and FINRA related issues and has substantial expertise and experience in the securities and brokerage business.
The FBI recently indicted Michael Stewart of Phoenix, Arizona, and John Packard, of Long Beach, California, for allegedly operating a massive real estate ponzi scheme fraud through their companies, Pacific Property Assets (PPA) and Apartments America, LLC (AA). According to the SEC, which previously brought civil fraud charges against the alleged fraudsters, Stewart and Packard swindled investors out of more than $110 million by misrepresenting their companies’ financial condition to prospective investors in the period leading up to and following the 2007 real estate collapse.
While PPA and AA generally were not profitable, Stewart and Packard were able to take advantage of favorable market conditions to refinance and cash out the equity in various apartment buildings they owned through PPA and AA. When the real estate market crashed, however, PPA filed for bankruptcy, indicating that it owed more than $90 million to investors. Those investors received nothing in connection with the bankruptcy proceeding.
The FBI has accused Stewart and Packard of criminal fraud and of operating a Ponzi scheme, whereby purported returns to existing investors are paid from funds contributed by new investors. If you have been the victim of a Ponzi Scheme, or are involved in a Ponzi scheme “claw-back” case, please contact our firm to discuss the specifics of your case.
