MUTUAL FUND SWITCHING LAWYERS BASED IN NEW YORK

Mutual fund switching involves selling the shares in a mutual fund and investing the earnings in shares that belong to another mutual fund. Typically, investors do this whenever economic conditions allow for it, or if they have different investment priorities. During transactions regarding mutual funds, costs or loads might be incurred. As a result, mutual fund switching can be an expensive process unless the investor chooses to switch funds within a family of funds or use specific no-load funds.

Mutual Fund Violations

Regardless of how experienced an investor is, there are several mutual fund switching violations that might be commonly committed. However, this can be hard for investors to spot. Since mutual funds are usually meant to be long-term investments, if you switch mutual funds that have the same investment goals, you can be in violation of switching sales practices. Furthermore, this might result in investors having to pay a commission fee and raise the chances of higher tax liability.

Mutual Fund Churning

On the other hand, if an investor continues to buy and sell mutual funds that come from different fund families, this might cause too much churning. This refers to the over-trading of an investment due to the larger risk of tax liability and other commission fees. As such, the switching of mutual funds across varying fund families might result in a conflict of interest. The only exception is if the investments in a certain portfolio are from a goodwill division of investments.

Owning Mutual Funds

The general rule of thumb is that mutual funds are supposed to be owned for extended periods of time. This means that they are not usually supposed to be easily traded like other kinds of stocks. One of the reasons for this is that investors usually have to pay large amounts of money when they transact the mutual funds that are not in existence for common stocks. Hence, mutual fund managers typically choose the securities that should be held in the fund. This enables the diversification of investment portfolios without needing to sell the mutual fund.

FINRA Violation

As mentioned, switching mutual funds within funds that have the same investment objective is a FINRA violation. Other violations might also be committed when brokers do not ensure that their financial advisors refrain from having dishonest business practices. If financial advisors advise their customers to purchase mutual funds in quantities that are slightly below the sales commission breakpoint, customers may pay a smaller commission. While this might help brokerage firms earn more revenue, it might compromise the funds that customers own.

Contact Our Experienced New York Attorney Today. We Represent Clients Nationwide!

Do you suspect that your brokerage firm is involved in dishonest practices such as churning for their own selfish gain? If you do, you will only stand to benefit from hiring a professional and competent securities litigation attorney to represent you. Here at Weltz Law, we are dedicated to helping our clients in FINRA arbitration and securities litigation.