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Mutual Fund Fraud Lawyers

B Shares

When investing in mutual funds through a broker or investment professional, investors are often presented with various mutual fund classes to choose from. Each class differs primarily in the expense ratios and the commissions paid to brokers. Understanding these differences is crucial as they directly impact the overall cost and potential return on your investment.

Securities attorneys and law firms practicing investment law can provide critical guidance in these matters. These professionals are well-versed in the nuances of mutual fund investments and can help investors navigate the complex fee structures associated with different mutual fund classes. They ensure that investors are fully informed about all costs involved, which can significantly affect long-term investment outcomes.

Furthermore, a law firm with expertise in securities law can assist in evaluating whether the recommendations made by brokers align with the investor’s best interests. If discrepancies or conflicts of interest are identified, securities attorneys can advocate on behalf of the client, seeking resolutions that protect the investor’s financial interests.

For investors, understanding the financial implications of mutual fund classes and seeking the advice of qualified securities attorneys can lead to more informed decision-making. This approach not only helps in selecting the most cost-effective investment options but also safeguards against potential misrepresentations or unethical practices by brokers. Thus, engaging with a reputable law firm experienced in securities can be a valuable asset in managing and protecting one’s investment portfolio.

Before purchasing B shares in a mutual fund a careful analysis should be undertaken by your broker to determine whether Class B shares are in your best interest. Part of this analysis includes the broker asking you the following questions:

Class B shares do not impose front-end sales charges, which is the most common selling point. However, Class B shares charge higher expenses in the form of 12b-1 fees and other charges to investors that are assessed over the lifetime of the investment compared to Class A shares. Class B shares normally impose a contingent deferred sales charge (CDSC) which an investor pays if the shares are sold within a certain number of years.

Class B shares also deprive investors of breakpoint discounts on the commission earned by a broker. Large purchases of Class A shares receive discounted commissions while purchases of B share do not.

In June 2003 the NASD censured and fined a brokerage firm, suspended its chairman and directed that restitution be paid to customers for among other things recommending the purchase of large positions in Class B shares. The NASD found that the sales practice violated NASD suitability rules.

The NASD National Adjudicatory Council has also held that a broker’s suitability obligation includes the requirement to minimize the sales charges paid for mutual fund shares, when consistent with the customer investment objectives.