Robert Keith Smith, formerly a broker with Berthel Fisher, has been accused by more than ten of his clients throughout his career of overconcentrating their accounts in private placement securities, including equipment leasing programs, oil and gas investments, and non-traded real estate investment trusts.
Smith started his career in 2000 with American General Securities and was registered with the firm until May 2006. Subsequently, he was associated with ProEquities until June 2010 and with Berthel, Fisher & Company Financial Services until June 2014.
Numerous complaints against the same broker regarding the same or similar charges of misconduct is unusual in the brokerage industry. The majority of brokers go their whole careers without having a complaint against them. The number of brokers who have more than two customer complaints against them is remarkably low. Accordingly, having over ten customer complaints against Smith, all of which regard private placement securities, is highly irregular.
The kinds of products Smith sold to investors on their face appear to be inappropriate. In oil and gas, Non-Traded REIT, and equipment leasing programs, investors normally receive a steady stream of income for as many as five to seven years without any issues. However, at some point, the income ceases or the interest payments are lowered greatly. Not until this point does the investor discover that such products are not expected to return the investor's principal. These products provide a false sense of security to investors since they receive such a steady stream of income after they are purchased.
Specifically regarding Non-Traded REITs, a large portion of the income in the early years is only a return of investment principal instead of income generated from the investment. If the REIT is discovered to be unprofitable, usually the income ceases or is lowered.
Oil and gas private placements also often only pay income for a couple of years while the well or oil venture produces income. These ventures are usually destined to fail and only pay investors a small portion of the amount they invested. Even still, these investments are pushed by dishonest brokers as infallible investments that will produce income and at some point pay principal without discussing the alarming risks associated with these products.
According to FINRA, Berthel Fisher has had a history of failing to supervise the concentration amounts in these types of investments. FINRA fined the firm $775,000 stemming from allegations that it failed to supervise the sale of alternative investments from January 2008 to February 2012. In that time period, FINRA alleged that Berthel Fisher had inadequate supervisory systems and lacked proper written supervisory procedures pertaining to the sales of these alternative investment products. The firm was also alleged to have sold these products at a level of concentration that exceeded their respective investment objectives, making the sales and recommendations unsuitable. FINRA further alleges that Berthel Fisher failed to train its employees on individual state suitability standards.