Claris Law Legal Blogging Community

Editor: Debra G. Speyer, Esq.
Profession: Attorney

Category: Do I have a case?

My law firm is in the middle of negotiating a settlement involving an arbitration that was brought against a brokerage firm for selling an investor mutual fund B share. With mutual fund B shares, you do not pay an up-front commission, but you do have back-end surrender charges if you sell the mutual funds before the surrender fees terminate. You also pay a higher annual fee to the mutual fund company.

With an A share, you pay an up-front fee such as 5%, 4%, 3%, 2%, 1%. The fee goes down the more money you invest in the mutual fund or in the same family of funds. You also pay a smaller annual fee by purchasing A shares. Most investors are better off in mutual fund A shares. My client ended up purchasing $2 million in mutual funds but was put into B shares instead of A shares. Investors have brought arbitrations around the country to recovery the excess B share charges they incurred. The NASD has also investigated these types of violations and has brought enforcement actions against a number of brokerage firms selling clients B share mutual funds. Investors should review their mutual funds to see if they were in A shares or B shares . The NASD website has information about the differences between A shares and B shares and helps investors determine which type of share is right for that investor.