More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
Claims by three accredited investors against broker-dealer Berthel Fisher & Co. Financial Services, of Marion, Iowa, were dismissed by a FINRA arbitration panel on April 9 after five weeks of proceedings that stretched out over several months.
The claims were filed in connection with the purchase of tenancy in common (TIC) interests that investors who filed the claims alleged were valueless because they were “a massive fraudulent investment scheme managed by” the respondents in the case, which included not only Berthel Fisher but also Ameriprise Financial Services. The investors sought the rescission of their investments and return of their money.
Hearings began in August, but were interrupted and then resumed in February, concluding in March. After testimony that, according to the broker-dealer, “included hundreds of exhibits, testimony from industry experts and more than fifteen fact witnesses,” arbitrators dismissed investor claims against Berthel Fisher. Ameriprise Financial Services did not participate, as it is not a member of FINRA, and no claims were adjudicated against it, according to the arbitration award.
When asked by AdvisorOne about the investors’ claim that the TIC interests were valueless, Rick Murphy, president of Berthel Fisher, said, “We don’t believe so. The building is still there; they [the investors] still own it; it’s still fully occupied.”
While he said that the value of One Southwest Crossing, a class A office building of more than 200,000 square feet in Eden Prairie, Minn., may have gone down when the real estate market crashed, he added that the company tells its investors that it cannot control what the real estate market does.
Murphy said, “We believe, and I believe SEC and FINRA believe, that tenant in common securities are securities under the Act [the Securities Act of 1933]. But it is direct ownership of real estate.” He added that the company believed Berthel Fisher complied with requirements for due diligence regarding such securities, both as required by FINRA and under the Act, “and the arbitration panel obviously felt we had done so as well.”