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The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have finally ramped up enforcement on the sale of private stakes in companies. It is reported that more than 16 million households in the United States are investing directly in private companies. With one in eight households making direct investment in these high risk ventures, the financial fallout from investments gone bad is substantial. The impact of such private investments on the affected individuals can be devastating. In many instances, the individual investors do not see the danger that lurks because private companies do not have to make the same disclosures that public companies do.

In October 2018 Christopher Lonn proceeded to FINRA securities arbitration against Berthel Fisher & Company Financial Services, Inc. and its registered representative, Robert D’Agosta. Mr. Lonn’s client, Roy Manson, filed the claim in 2016 alleging, inter alia, that over a period of at least six years that Berthel Fisher and D’Agosta breached fiduciary duties owed to Mr. Manson and violated the anti-fraud provisions of the Arizona Securities Act. As Roy Manson approached retirement at the end of 2011, he rolled over his 401k account to the care of Berthel Fisher and D’Agosta. Contrary to Mr. Manson’s stated investment objectives and risk tolerance, Berthel Fisher and D’Agosta solicited Mr. Manson to invest the vast majority of his retirement funds into numerous high-risk and illiquid private investments also known as “alternative investments.” D’Agosta misrepresented these high risk investments to Mr. Manson as safe and relatively low risk. One such “alternative investment” Mr. Manson also alleged that Berthel Fisher failed to properly supervise D’Agosta by failing to insure that Mr. Manson was provided with a prospectus for each private investment at the time of solicitation. To make matters worse, D’Agosta was also trading options without written authorization in another account that he managed for Mr. Manson. Berthel Fisher is based in Cedar Rapids, Iowa and D’Agosta operated his business out of remote office in Pennsylvania.

Following the extensive five day FINRA arbitration, the panel of three arbitrators found that Berthel Fisher and D’Agosta were jointly and severally liable to Mr. Manson for compensatory damages. In addition, the arbitration panel specifically found that Berthel Fisher and D’Agosta were liable for punitive damages in an amount equal to the compensatory damages due to Mr. Manson. The arbitration panel stated that the punitive damages were awarded for material misrepresentations and omissions by D’Agosta tantamount to fraud in the sale of securities.

For more information on this topic or other commercial litigation matters, please contact Mr. Lonn.
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Christopher D. Lonn | Read Bio