Berthel Fisher & Co Accused of Supervisory and Compliance Issues Involving a Customer
The Financial Industry Regulatory Authority (FINRA) announced that Berthel Fisher & Co. had been ordered to pay a $100K fine. This fine concerns shortcomings related to compliance involving options trades in a customer’s account. The firm is not denying or admitting to the self-regulatory organization’s (SRO) findings.
According to FINRA, in August 2015, while looking over a customer’s request for approval to trade options in his account, Berthel Fisher & Co neglected to conduct due diligence. The broker-dealer failed to ensure that this type of transaction was suitable based on the client’s investment experience.
Between August 2015 and February 2018, the brokerage firm is also accused of recommending options transactions to this customer without, once again, having reasonable grounds for thinking they would be a suitable fit for him.
The SRO said that Berthel Fisher did not set up and maintain a supervisory system and supervisory procedures that were designed in a reasonable enough manner during this period. A supervisory system must comply with rules involving suitability and options trading in customer accounts. FINRA also accused the broker-dealer of not enforcing several provisions that were already in its written supervisory procedures about options trading.
More About Options Trades
These contracts give their buyers the right to sell or buy a security, an index’s cash value, or a commodity at a set price by a given date. Call options allow the holder to purchase the asset at a stated price during a specific timeframe. Put options let the holder sell the asset at a certain price within a certain timeframe.
Although the options trading industry has recently undergone a “boom” in drawing in retail investors, options are complex trading instruments. They are generally not suitable for this type of customer. This is one reason why in 2021, FINRA began a probe into how firms supervise and deal with setting up options accounts.
While there are benefits to options trading, including that a smaller initial outlay is usually required than with purchasing stocks, and options can protect against portfolio losses, there are risks. Someone who trades in options may be exposed to huge losses, and margin requirements can increase trading costs.
Skilled Options Trading Attorneys
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent investors who have suffered losses due to unsuitability issues involving options trading or because their broker neglected to apprise them of the risks fully. Contact SSEK Law Firm at (800) 259-9010 today if you were a Berthel Fisher customer that suffered losses in options trading.