Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against Berthel, Fisher & Company Financial Services, Inc. and Jeffrey Paul Dragon for recommending and effecting a pattern of unsuitable short-term trading of UITs (Unit Investment Trusts).
FINRA has alleged that the short-term trading patterns were inconsistent with the design of the securities at issue and required the customers to pay substantial sales charges, most of which came back to the firm and the representative in the form of dealer concessions. Dragon recommended to the customers—many of whom were seniors, unsophisticated investors, or both—that they liquidate UIT positions that they had held for only a few months, and which they had purchased on Dragon’s recommendations, and then use the proceeds to purchase other UITs. Because each UIT purchased carried a new sales load, and because UITs are designed not to be actively traded, Dragon’s recommendations were excessive and unsuitable. Dragon made the recommendations to the customers that they buy and sell UITs without having reasonable grounds for believing that the consistent pattern of short-term UIT trading he recommended was suitable for any of the customers, given their age, personal and financial situations and needs, the nature of the recommended UIT transactions, including the sales charges and other costs associated with them, and the availability of less costly alternatives. Dragon also routinely structured the UIT purchases he recommended to the customers in order to prevent the customers from qualifying for sales-charge discounts, which would have reduced the dealer concessions paid to him and the firm. Dragon made the structured recommendations to the customers without having a reasonable basis to believe that those recommendations, which prevented the customers from receiving available discounts to which they were entitled, were suitable for those customers or for any customer,
FINRA also alleges that Berthel, Fisher allowed this activity to occur, and in fact, profited from it, as a direct result of its inadequate system for supervising UIT trading. Berthel, Fisher failed to establish and maintain a supervisory system that was reasonably designed to ensure compliance with its and its representatives’ suitability obligations under the federal securities laws and FINRA and NASD rules in connection with sales of UITs, and to ensure that customers received sales-charge discounts to which they were entitled on UIT purchases. The firm’s supervisory system was also inadequate because it was not reasonably designed to prevent short-term and potentially excessive trading in mutual funds.
From 2010 through 2014, the firm failed to detect that more than 2,700 of its customers’ UIT purchases did not receive applicable sales-charge discounts. As a result, firm customers paid excessive sales charges of approximately $667,000, nearly all of which was paid to the firm and its registered representatives as dealer concessions
If you or someone you know lost money investing with Jeffrey Paul Dragon and/or Berthel, Fisher & Company Financial Services, Inc. you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or firstname.lastname@example.org for a free and confidential case evaluation.