Berthel Fisher & Co. Financial Services Inc. at the end of 2022 reported open claims by investors against the firm of $32.1 million in total, or almost eight times what it reported a year earlier, according to Berthel Fisher's annual audited financial statement, which it filed last month with the Securities and Exchange Commission.
The firm's reporting shows potential claims against the firm went through the roof last year. At the end of 2021, Berthel Fisher, which is based in Cedar Rapids, Iowa, and has close to 250 independent contractor reps, reported "open claims" with unspecified damages ranging from $1.1 million to $4.9 million in aggregate, according to its audited financial statement, called a Focus Report.
The firm's Focus Reports for the last two years don't identify the investment or investments that are causing the firm's auditors to warn of spiraling potential legal claims against the firm. Berthel Fisher has been known to sell a variety of alternative investments, which at times can be expensive and volatile and, if they go south, can lead to a slew of investor complaints against a broker-dealer.
Joanna Schaul, Berthel Fisher's senior vice president for administration, did not return calls Monday to comment.
In its filing, Berthel Fisher noted that it had accrued $315,000 in accounts payable relating to these issues, as well as having errors and omissions insurance to protect itself from potential damages and legal costs.
One plaintiff's attorney pointed to two recent alternative investments as possible causes for the skyrocketing potential investor claims Berthel Fisher is facing.
"A lot of these independent broker-dealers have GPB private placement and GWG L bond liability," said Jason Kane, a partner at Peiffer Wolf Carr Kane Conway & Wise. GPB and GWG are alternative investment product sponsors that have been targets of investor complaints recently; GWG declared bankruptcy last year, leaving bond holders with more than $1 billion of bonds. Dozens of broker-dealers sold the GWG L bonds.
"We haven’t hit Berthel Fisher with any potential claims recently, but we have a fair number of alternative investment customer claims against them already," Kane said. "But it's nothing truly out of the ordinary."
Berthel Fisher has a long history of selling alternative investment products.
In 2019, Financial Industry Regulatory Authority Inc. arbitrators awarded six investors $1.16 million in a case in which they alleged Berthel Fisher had sold them inappropriate complex investments. In 2018, Finra censured the firm and fined it $675,000 over sales of nontraded real estate investment trusts, nontraditional exchange-traded funds and other alternative investments.
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