Berthel Fisher Fined $100,000 for Options Trading Compliance Failures in Elderly Client's Account

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FINRA fined alternative investments firm Berthel Fisher & Co Financial Services $100,000 for failing to exercise adequate due diligence and for making options trading recommendations without a suitable basis for those recommendations. Furthermore, FINRA cited Berthel Fisher for failing to establish and maintain a satisfactory supervisory system in compliance with industry rules and regulations.

According to AWC #2018057425202, a customer complaint after losing money over put and call options on an index fund, QQQ, spurred FINRA to open an investigation of Berthel Fisher, finding that the brokerage firm ran afoul of several industry standards in unsuitably recommending options trading to a 71-year-old retired investor.

In 2020, FINRA suspended former Berthel Fisher broker Mason Gann for unsuitably recommending risky options transactions to a 71-year-old client. FINRA's findings called out Gann for using an unsuitable investment strategy known as uncovered puts, aka naked puts.

For instance, FINRA found that Berthel Fisher approved its customer for options trading at certain levels that the firm's own guidelines should have excluded the customer from: the senior citizen client's experience level and risk tolerance preferences, according to FINRA, were incompatible with what Berthel Fisher recommended regarding options as a source of generating income.

The report states that the customer's account holdings did not produce enough income or gains to offset withdrawals and that Berthel Fisher's broker recommended unsuitable options transactions on an index fund called QQQ.

FINRA found that over the course of at least 28 unsuitable options transactions, the elderly customer's account lost more than 50% of its value in the first six months after Berthel Fisher's broker unsuitably recommended and the firm improperly approved an options trading strategy.

Because FINRA found this to be a more systemic issue within Berthel Fisher itself, finding the firm lacked adequate supervisory systems, in addition to simply failing to supervise this particular instance of unsuitable options trading, the regulator censured and fined the firm $100,000.

If you invested with a broker or financial adviser who unsuitably recommended options trading or any other alternative investment or complex product that was unsuitable for you, given your risk tolerance preferences and investment objectives, and such an improper trading strategy resulted in losses or other financial damages, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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