More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
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.”