Unsuitable Recommendations for Purchasing Class B Shares

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

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.


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