Finra arbitrators awarded six investors $1.16 million in a case in which they alleged Berthel Fisher & Co. Financial Services Inc. sold them inappropriate complex investments.
The three-member, all-public Financial Industry Regulatory Authority Inc. panel found the firm, three of its executives — Thomas Joseph Berthel, Ronald Odin Brendengen and Richard Maurice Murphy — and a former broker, Jerry Dewayne McCutchen Sr., liable. The causes of action related to investments in equipment leases, direct participation programs and several real estate investment trusts.
In the July 15 award, the arbitrators gave each of the investors the following amounts in compensatory damages: Jerry and Louise Trawick, $291,827; Richard and Marilyn Bjornas, $280,288; and Chad and Michelle Greer, $229,420. The arbitrators ruled Berthel and Mr. McCutcheon Sr. are liable for $50,000 and $10,000 in punitive damages, respectively, to each of the couples.
Berthel, the executives and Mr. McCutchen must also pay the claimants $248,614 in attorney fees and $110,966 in costs and other damages.
Mr. McCutchen worked at Berthel from 2007 until 2014, according to his BrokerCheck profile. He was barred from the industry by Finra after 27 years at 10 firms. He had accumulated 43 disciplinary disclosures.
The unsuitable sales to the claimants occurred from 2007 through 2012 in the Mobile, Ala., area, according to their lawyer, Michael Bixby, an associate at Levin Papantonio Thomas Mitchell,Rafferty & Proctor.
Berthel filled up the investors' portfolios with the same kinds of complex, high-risk products that didn't fit their risk profiles, Mr. Bixby said. Two of the couples were retirees.
"These types of products shouldn't be sold across the board," Mr. Bixby said. "You need to have an appropriate supervisory system in place. Red flag, after red flag, was ignored — either intentionally or negligently."
Mr. Berthel, the firm's chief executive, said it treats clients well.
"While we respect their work, we are disappointed in the arbitration panel's decision in this case brought by clients of one of our registered representatives who retired over four-and-a-half years ago," Mr. Berthel said in a statement. "We greatly appreciate our clients and we work hard to give them excellent service and good investment advice. We look forward to continuing these efforts in the years to come."
The investors filed their claim in 2017, approximately five years after the inappropriate sales.
"The market surrounding these [illiquid investments] is very opaque," Mr. Bixby said. Victims "may not discover there was a loss or wrongdoing until years later."