Negligent and unscrupulous brokers and financial advisors often make unsuitable
recommendations for buying Class B shares of mutual funds to make higher
commissions. Such recommendations often result in significant investment
losses for investors.
Investment Fraud and Mutual Funds
In recent years, the securities regulators have warned investors about
investment fraud involving the purchase of Class B shares of mutual funds.
A significant number of securities firms have been censored and fined
for improperly recommending the purchase of Class B shares of mutual funds.
Many brokers and advisors have been disciplined and suspended for making
improper recommendations to investors about the purchase of Class B shares.
Negligent brokers intentionally fail to inform investors about deferred
charges that can result in huge investment losses. Investment loss attorneys
commonly see brokers who recommend Class B shares over Class A shares
of mutual funds to make higher commissions.
Mutual funds offers various classes of shares for purchase by investors.
Typical classes include Class A, Class B, and Class C. The major difference
between classes of shares relates to fees and expenses imposed on each class.
Class B Shares
Although Class A shares have a front-end sales charge, they are usually
more cost effective than Class B shares, especially with large investments.
Class B shares do not have front-end sales charges, but they do carry
contingent deferred sales charges and higher fees than other classes of
mutual funds. Contingent deferred sales charges are imposed when shares
are sold during the surrender period, usually the first six years after
the purchase is made. These charges are imposed to cover various company
costs and upfront commissions paid to brokers, often as high as four percent.
Selling Class B shares during the first six years can significantly diminish
investment returns. Investors get locked into longer investments and forced
to pay annual percentage charges, because brokers fail to properly disclose
charges imposed on Class B shares. Brokers often present mutual fund B
shares to investors as no-load funds, a class of mutual funds that don't
charge front-end sales loads, but they fail to explain other charges and
fees. By virtue of negligence or fraud, brokers often place investors'
assets in Class B shares rather than Class A shares to make more money
for themselves through higher commissions. As a result, investment loss
attorneys see large-scale investors who lose millions and senior investors
who lose their retirement savings.
Call our experienced investment fraud lawyers today to discuss your case.