Berthel Fisher & Co. Financial Services Inc. is the latest firm to be penalized by the Securities and Exchange Commission over a lack of full disclosure about conflicts related to fund sales, with the firm reaching a settlement with the commission to pay a penalty of $389,000, including disgorgement and interest.
The firm, which is known for selling alternative investments, neither admitted to or denied the SEC's findings in the settlement, which was released Sept. 16. A spokesperson for Berthel Fisher did not return phone calls Thursday to comment.
The SEC has been cracking down on disclosures surrounding payments by funds to broker-dealers and RIAs. The SEC launched the initiative in February 2018 to target advisory firms that recommended high-fee mutual funds without telling clients that less expensive share classes were available in the same funds.
The settlement had a few findings. First, from January 2014 through March 2018, Berthel Fisher and its reps who were also investment advisory representatives, called IARs, received 12b-1 fees from mutual fund share classes that it had purchased, recommended, or held for advisory clients instead of lower-cost share classes of the same funds that were available to the clients, according to the SEC.
Berthel Fisher did not adequately disclose this conflict of interest in its
Forms ADV or otherwise.
Next, from September 2016 through March 2018, the firm invested clients in higher-cost money market funds rather than lower-cost options, and also received revenue-sharing payments from its clearing firm without revealing the conflict, according to the SEC.
Finally, according to the SEC, Berthel Fisher did not seek best execution for clients and did not implement compliance policies to prevent such conflicts.
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