# BERTHEL, FISHER & COMPANY FINANCIAL SERVICES, INC. X-17A-5 (2023-03-28) — Broker-dealer annual report - Company: BERTHEL, FISHER & COMPANY FINANCIAL SERVICES, INC. - Form: X-17A-5 - Filed: 2023-03-28 - Period: 2022-12-31 - Accession: 0000088436-23-000002 - CIK: 717799 - File #: 8-29426 - Type: Broker-dealer - Material weakness: No - Auditor: Marcum - Auditor location: Deerfield, IL - Contact: Brian Rupp - Phone: 3194475700 - Email: brupp@berthel.com - Website: berthel.com - Signed by: Brian Rupp (VP/Controller) Original filing: https://www.sec.gov/Archives/edgar/data/717799/000008843623000002/22fspublic.pdf --- {0}------------------------------------------------ Financial Statement and Independent Auditor's Report December 31, 2022 Filed as a Public Document Pursuant to Rule 17a-5(d) of the Securities Exchange Act of 1934. \*\*\* PUBLIC DOCUMENT \*\*\* {1}------------------------------------------------ ### Berthel Fisher & Company Financial Services, Inc. (A Wholly Owned Subsidiary of Berthel Fisher & Company) ### TABLE OF CONTENTS | | Page | |---------------------------------------------------------|--------| | LETTER OF OATH OR AFFIRMATION | 1-2 | | REPORT OF INDEPENDENT RECISTERED PUBLIC ACCOUNTING FIRM | 3 | | FINANCIAL STATEMENT | | | Statement of Financial Condition | ব | | Notes to the Financial Statement | 5 = 10 | {2}------------------------------------------------ OMB APPROVAL UNITED STATES OMB Number: 3235-0123 SECURITIES AND EXCHANGE COMMISSION Expires: Oct. 31, 2023 Washington, D.C. 20549 Estimated average burden hours per response: 12 ANNUAL REPORTS SEC FILE NUMBER FORM X-17A-5 8-29426 PART III FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 AND ENDING 12/31/2022 filing for the period beginning 1/01/2022 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF FIRM: Berthel Fisher & Company Financial Services, Inc TYPE OF REGISTRANT (check all applicable boxes): Broker-dealer □ Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 4201 - 42nd St. NE Suite 100 (No. and Street) 52402 Cedar Rapids IA (Zip Code) (City) (State) PERSON TO CONTACT WITH REGARD TO THIS FILING 319-447-5700 Brian Rupp brupp@berthel.com (Area Code - Telephone Number) (Email Address) (Name) B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* Marcum LLP (Name – if individual, state last, first, and middle name) 60015 Nine Parkway North Suite 200 Deerfield (Address) (City) (State) (Zip Code) 10/16/2003 688 (Date of Registration with PCAOB)(if applicable) (PCAOB Registration Number, if applicable) FOR OFFICIAL USE ONLY \* Claims for exemption from the requirement that the annual reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. {3}------------------------------------------------ #### OATH OR AFFIRMATION swear (or affirm) that, to the best of my knowledge and belief, the I. Brian Rupp financial report pertaining to the firm of Berthel Fisher & Company Financial Services, Inc as of as of 12/31 , 2 022 partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. ![](_page_3_Figure_3.jpeg) Notary Public ### This filing\*\* contains (check all applicable boxes): - (a) Statement of financial condition. - (b) Notes to consolidated statement of financial condition. - [] {c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation S-X). - [ (d) Statement of cash flows. - [] (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - [] (f) Statement of changes in liabilities subordinated to claims of creditors. - (g) Notes to consolidated financial statements. - [ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [ (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - □ {k} Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - [ (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. - [ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - [] (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - □ (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - □ Jp) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - 12 (q) Oath or affirmation in accordance with 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - □ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - [ (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (t) Independent public accountant's report based on an examination of the statement of financial condition. - □ (u) Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - □ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). - □ (z) Other: - \*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.180-7(d)(2), as applicable. {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) # REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM # To the Board of Directors and Stockholder of Berthel Fisher & Company Financial Services, Inc. # Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Berthel Fisher & Company Financial Services, Inc. (the "Company") as of December 31, 2022 and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. ## Basis for Opinion This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2021. Deerfield, IL March 17, 2023 {5}------------------------------------------------ #### ASSETS | ASSETS | | |-------------|------------| | | 2,211,793 | | | 100,000 | | | 1,090,735 | | | 930,309 | | | 144,953 | | | 1,008,543 | | | | | | 1 | | | 472,117 | | | 453,000 | | | 2,829 | | | 86,316 | | Goodwill | 3,880,029 | | | 10,380,625 | | | | | LIABILITIES | | | | 1,464,057 | | | 9,702 | | | 754,729 | | | 2,228,488 | | | | | | | | | 2,821,148 | | | | | | 300,142 | | | 12,245,873 | | | 7,215,026) | | | 8,152,137 | | Y | 10,380,625 | {6}------------------------------------------------ ### NOTES TO FINANCIAL STATEMENT #### NOTE 1-NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business: Berthel Fisher & Company Financial Services, Inc. (the "Company"), a wholly owned subsidiary of Berthel Fisher & Company (the "Parent"). The Company is a broker-dealer registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 and is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker, a member of the Financial Industry (FINRA), and the Securities Investor Protection (SIPC). The Company is a securities broker-dealer and a registered investment advisor that sells various securities such as equity, fixed income, mutual funds, insurance, and direct investment products. The Company is a fully disclosed broker-dealer. All trades are transacted through a clearing broker or through mutual fund and variable annuity product sponsors. Basis of Presentation: The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents also include cash held by clearing brokers. Deposit with Clearing Firm: The Company is required to hold an introducing firm deposit in the name of the Company with its clearing firm per the terms of the clearing agreement. Commissions Receivable: Receivables from clearing broker and commissions receivable primarily consists of commission and transaction-related receivables and receivables from affiliates. Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the goodwill impairment testing and the determination of litigation accruals. Investments in Securities: Investments in securities consist primarily of marketable equity transactions are recorded on a trade date basis. Interest income is accrued as earned and dividend income is recognized on the exdividend date. Investments in equity securities with readily determinable fair value, which are based on quoted market prices for similar investments. Notes Receivable: The Company provides forgivable loans to certain registered representatives primarily for recruiting and retention purposes, including assisting new registered representatives in transition costs incurred moving client accounts to the Company. These loans are recorded at face value at the time the loan is made. These loans do not bear interest and will be amortized over three to five years from the approval date. In the event a representative's affiliation terminates prior to the term of the representative is required to repay the original balance of the note. Forgivable loans totaled \$760,174 with accumulated amortization of \$28,057 as of December 31, 2022. Amortization expense is included in commission and compensation expense in the statement of operations. Management's estimate of the allowance is based on the status of the representative's affiliation with the Company, including the representative's payment history. As of December 31, 2022, there is no allowance for credit losses associated with these receivables. Goodwill: The Company is required to assess goodwill for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Management performs goodwill testing as of December 31, 2022. Using a quantitative approach, management determined that as of December 31, 2022, there was no impairment. {7}------------------------------------------------ ### FINANCIA ICES, . Wh wned thel ) ### O BUSINESS IFICANT ACCOUNTI CI (Continued) : Th mpan cluded h solidated e led t e come alcul h o return ba t or be lated fr rre n deferre pa fundab recogniz a financ statemen utilizing rren enacted Deferred pens benefits recognized th anc statemen ange in deferred r between ye Deferred e ided on ility method whereby deferred recognized fo deductib rary differen operating edit fo deferred liab gn abl rary differen r differen differen betw orted nt Deferred re by atio wh n inio of agement s ely h not h portion or de not e ferred i justed of ange n e h When a urn file t s ghly rtain hat positi ake woul ustaine p xaminati y h axi author the bj uncertainty position en or h unt of h sition that woul e ultimately staine ene positio recognized n financ statemen h period during which, ased availabl iden ement be ely han no position e ed upon amination, cluding th lutio of itigation proc ye e e l 2022 h tity ha ncertain positions h required o e record Instruments d n fo nancia m n off-bala h redit ure accordan Financia Inst — osse 32 requi n o x d ses anc n alan heet posures f h reporti date base n relevant nformation out ven o n reasonab n supporta h ompan ords h s t fo nancial o ount h bala sh th e Change in c rted bad debt xpense, h s red lo ov of nanc of rting date n evant informatio about events current n b cont ugh anizatio d a be g organization any. e eriod of ompany ntinually revi h quality unterparties purposes depreciati s omputed by h straight-lin method over h timat ful lives. Comm ock: n he rdina ourse f business he rent of h ompany e nto financi greements hat requir t o pl h ompany's mm st ollateral. s s not treat deductio fo net tal rposes ations: h ny's vables receiva d n ontracts, receivable u r bles de d n r d o action, r of bability unfavorabl out 3) ability ably th nt of Property quipment: Property n quipmen allowanc reciation. anc reportin Accrued atio Contingencies: The n der erminin n disclosu of ation tingenc ou e e nanc emen occu s lo 7. {8}------------------------------------------------ #### FINANCIA ICES, . Wh wned thel ) #### O BUSINESS IFICANT ACCOUNTI CI (Concluded) Fa a Measurements: The u n h odification d liab measured repo alu a Th alu ierarch ive th highe rio uote pr n o priority unobservab pu (Lev 3) Inpu ly defined unde i tions mark articipan woul s pricing ility h vels u hierarch nde this topi bed below. Leve 1 adjusted quoted v mark en rting tity a Leve ts the th ted pr with leve th observab th liability i r indirectly; valu determined through the use models or he uatio ethodologies significant adjustment e uld resu h vel surement oming level 3 rement. Leve Inpu unobservab h r ility and nclud uatio th , market activity r ility into determination f alu ased upo th e information measurem rcumst n significant nagement udgement . s h nputs o ure valu into fferent levels th fair ue erarchy. such estment e in r ierarchy based on e ut significant h urem Th asse particul h r va uremen in ts iret requi udgment n onsiders ors pecifi o h nvestment The ollowing i describes he th mpany to ifferen anc strument a clude h e within th alu ierarchy wh th financ strument orized determined based on derlying i eld fund no financial There be changes in uation technique d r ssets easured at fair valu in ear e Th ompany en nto various ngemen with t an Decembe th orded e d within Investment on natio ange ed o h da th n instruments assifi evel or . transf asse between erarch n Decembe 2022 ### 2- n o orded paes fo ,702. Various ncollateralized receivab r rok \$ 760,1 #### -NOTE RE Notes Decem | ortizatio
forgivab | (288,057 | |-----------------------|----------| | | \$
,1 | {9}------------------------------------------------ #### FINANCIA ICES, . Wh wned thel ) #### O ### INCO TAXE results f h ompan operatio r include n he nsolidat a returns f h nt. Generally catio mpan recognizing provision ivi mpan ed sepa u mpan recognizin bene o h xtent heir losses ntribut o reduce onsolidated axe Deferre n have n s member th temporary differen within h tity Deferre nco a with h rent s provided differen betwee nancial portin n a Included in ferred income a ar ral stat perating loss carryforwards f approximately 4,000,000 a \$3,800,000 of ecember 31 2022 ryforward ire rough 2038 exceptions h nt Compan r no onge ubject o ations by h differe r primarily n used account llowance accrue xpens tangible ra Th Parent mpan inco urn n fede urisd rious author y efo 2018 #### SE CONVERTIBL R Th Boar f irector has authorized ,000 shares ri lativ vertible preferre ock. preferred stock a preference n iquidation ove h mmon ockholder. The res n mulative percent annu dividend Th dividend ayabl f Company and a efo an ividend a ockholder dividends rrear n re h ockholder h khol r h oc share o he o u n n ompan resolutio of h oar Director n im red outstandi preferred s y paying th ockholde he onsiderati originally give plus l ccrue n unpaid dividends. In 022, h ompany ar and paid 8,008 dividend n ferred stock. Th ompan j change Commission Unif Cap l 15 wh requ h tena imu unt ne quires hat h atio ggregat ndebtedne o net capital, oth fine hall not xcee 15 o ule 15c3-l prov u p no e r requiremen of 14,753 mpany' o 1. 7- OMMITME ND CONTINGENCIES ln h normal cour of usiness, h ompan been fendant/respondent n or rty to ndin nd threatened ns cluding itrations and the litigation ht on eha f #### M divide d f h woul ex h o ne \$1,950,3 cu Ru 15c3- wh a 1,835,57 n require ne l on ed violations of s tection othe vo stan Th Nationa anc reemen requ omp 0,00 ne Some h k rminable Ce cti n r based g h {10}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENT #### NOTE 7- COMMITMENTS AND CONTINGENCIES (Concluded) The Company recognizes a legal liability when management believes it is probable that a liability has been incurred and the amount can be reasonably estimated. Conclusions on the likelihood that a liability has been incurred and estimates as to the amount of the liability are based on consultations with General Counsel of the Company who, when situations warrant, may engage and consult external counsel to assist with the evaluation and handle certain matters. Legal fees for defense costs are expensed as incurred. The Company will continue to identify legal actions where the Company believes a material loss to be reasonably estimable. There can be no assurance that material losses will not be incurred from claims the Company has not yet been notified of or are not yet determined to be probably possible and reasonable to estimate. Where available information indicates that it is probable that a liability has been incurred and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to net income. The Company has open claims ranging from unspecified damages up to \$30 million and approximately \$32.1 million in aggregate. The Company also accrued \$315,000 in accounts payable and other accrued expenses relating to these matters. It is possible some of the matters could require the Company to make additional payments or establish accruals in amounts that could not be estimated and/or could exceed those accrued as of December 31. 2022. The Company maintains E&O insurance to protect itself from potential damages and/or legal costs associated with certain litigation and arbitration proceedings and, as a result, in a majority of cases, the Company's exposure is linited to applicable policy limitations, exclusions and deductible levels based on products in any one case. If a claim is settled, and it is determined that the settlement amount is due from the insurance carrier, the Company records a receivable from the insurance carrier and a payment to the claimant for the amount of the settlement. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company's exposure is usually limited to the deductible per case, subject to policy limitations and exclusions. #### NOTE 8 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK Customer transactions are introduced to and clearing brokers. Under the terms of its clearing agreement, the Company is required to guarantee the performance of its customers in meeting contracted obligations may expose the Company to significant off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may incur. In the event a customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prices to fulfill the customer's obligations. In conjunction with the clearing brokers, the Company seeks to control the risks associated with its customers' activities by requiring customers to maintain collateral in compliance with various regulatory and internal guidelines. Compliance with the various guidelines is monitored daily and, pursuant to such guidelines, the customers may be required to deposit additional collateral or reduce positions where necessary. The Company does not anticipate nonperformance by customers or its clearing brokers. In addition, the Company has a policy of reviewing, as considered necessary, the clearing broker with which it conducts business. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. As of December 31, 2022, the Company maintained a cash balance in excess of the FDIC limits of approximately \$1,300,000. {11}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENT #### NOTE 8 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Concluded) Fair Value: The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2022: | | Quoted Prices | | | | | | |--------------------------------|------------------------------------------------------------|---------|-------------|--------------|---------|---------| | | In Active
Markets For
Identical
Assets
Level 1 | | Significant | | | | | | | | Other | Significant | | | | | | | Observable | Unobservable | | | | | | | Inputs | Inputs | | | | | | | | | Level 2 | Level 3 | | Common stock | S | | -()- | -0- | ಕೆ | | | Money market fund, included in | | | | | | | | cash and cash equivalents | 146,204 | | -0- | -0- | | 146,204 | | | | 146,205 | -()- | -0- | S | 146,205 | #### NOTE 9 - INDEMNIFICATIONS In the normal course of its business, the Company indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees, and administrators, against specified potential losses in connection with their acting as an agent of, or providing services to, the Company or its affiliates. The Company also indemnifies some clients against potential losses incurred in the event specified third-party service providers, including sub-custodians and third-party brokers, improperly execute transactions. The Company provides representations and warranties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into the normal course of business. The maximum potential amount of future payment that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.