Mutual Fund Fraud
If you purchase a mutual fund, you can basically choose between Class A and Class B shares. The difference between Class A and Class B shares is critical for an investor: with Class A shares you pay an upfront fee only, whereas with Class B shares you pay an upfront fee and a back-end fee when you sell the fund and if you do so before having held the shares for less than five or six years. Another difference is that Class A shares offer the investor discounts on commissions charged whereas Class B shares do not. Again, we see a conflict of interest between the investor and the stockbroker; an unscrupulous stockbroker will try to steer the investor into Class B shares in order to increase his or her commission even when Class B shares are not suitable for the investor.
Sometimes Class B shares are convenient for an investor. Some of the variables to consider in order to decide whether you should go for Class A or Class B shares are:
- How long you plan to hold the fund
- The return you think you will get from the Class B shares
- Whether you qualify for commission discounts if you purchase Class A shares
If you think that your stockbroker has unnecessarily put your investment into Class B shares and therefore charged your account with higher commissions, you might have a case against your stockbroker and should contact a securities arbitration lawyer.
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