A Florida mutual fund fraud lawyer at Colling Gilbert Wright can help you seek justice after being victimized by fraud. Our firm has built a reputation for excellence in a wide range of fraud cases and we are committed to helping our clients recover their losses.
Like all securities fraud, mutual fund fraud is governed by both state and federal laws, as well as professional rules and guidelines set forth by the NYSE and the FINRA (formerly NASD), as well as by common law standards establishing a minimum duty of care that professionals owe their clients.
If you are the victim of mutual fund fraud, call (800) 766-1000 today for a FREE consultation. Colling Gilbert Wright has helped many investors recover their financial losses. Our experienced attorneys have the knowledge, skill, and resources necessary to help you recover your losses.
What is Mutual Fund Fraud?
Mutual fund fraud occurs when a stockbroker or investment adviser buys or sells mutual funds for a client by misrepresenting the nature of the risks or recommending investments that are inappropriate to the client’s risk tolerance levels and investment goals.
Mutual funds are a type of investment that allows investors to purchase shares in a fund and pool their money with other investors to be invested in various securities. The specific securities that a mutual fund invests in depend on the fund’s type and investment strategy. One of the appealing aspects of mutual funds is their large size and potential to achieve strong returns.
Because they often have large amounts of money to invest, mutual funds can diversify their holdings by investing in a range of securities across different sectors. This can help to reduce volatility and increase returns. However, it is important to note that mutual funds can also be vulnerable to fraud.
Although mutual funds are regulated by the Investment Company Act and the Securities and Exchange Commission (SEC), fraud in the industry persists. According to FINRA, mutual funds are among the top 15 securities that experience the most disputes, many of which involve fraud, code violations, and other misconduct by fund companies. In the period from 2016 to 2017 alone, there were hundreds of complaints filed related to fraudulently inappropriate investment choices, excessive fees, and self-dealing.
One of the particularly damaging effects of mutual fund fraud is that a significant number of mutual funds are funded through 401(k)s, which contain retirement savings. When fraud occurs in these funds, it can result in the significant loss of people’s retirement savings, which can be a devastating blow.
It is clear that mutual fund fraud can have serious consequences for investors. Complaints about mutual fund fraud often involve losses in the billions of dollars, which are then distributed among affected investors, resulting in losses of thousands of dollars for each individual.
If you have been a victim of mutual fund fraud, it is important to carefully consider your options for seeking compensation. You should not have to bear the losses caused by your fund manager’s fraudulent, negligent, or selfish actions. If you need help understanding your rights and options, do not hesitate to contact a Florida mutual fund fraud lawyer at Colling Gilbert Wright for assistance.
Common Types of Mutual Fund Fraud
Mutual funds are designed for long-term investment, but in some cases, it may be appropriate to switch between different mutual funds or fund families as part of a thoughtful asset allocation or investment strategy. However, short-term investments in mutual funds are generally not recommended.
Keep the following types of mutual fund fraud in mind when investing in mutual funds:
Mutual Fund Breakpoints
Mutual fund breakpoints offer lower sales commission rates for investments above a certain threshold. If a financial advisor suggests that a customer invest just below this threshold, resulting in a higher sales commission for the customer, this may be considered a violation of sales practices (see FINRA Rule 2342).
Mutual Fund Switching
Mutual fund switching refers to the practice of selling one mutual fund and investing the proceeds in another mutual fund. While this may be a valid investment strategy in some cases, investors should be cautious if the two mutual funds have similar investment goals or no discernible difference in their investment approach. This kind of activity may only serve to generate a sales commission for the financial advisor, without providing any real benefit to the investor.
Excessive Mutual Fund Trading
Mutual fund investors should be aware of potential broker misconduct and fraud in the mutual fund industry. While mutual funds are typically intended for long-term investment, excessive trading of your funds by a broker may be a cause for concern. For instance, if a broker advises you to switch from an existing mutual fund with one company to a new fund with a different company, you may be required to pay “switch fees.” Your mutual fund fraud attorney may advise that if a broker suggests switching your funds to new companies in a short period of time, resulting in fees for the broker rather than benefiting your investment portfolio, the broker may be committing mutual fund fraud.
Failure to Assess Suitability
Before recommending an investment in Class B shares of a mutual fund, a broker must ensure that the recommendation is suitable for the investor. This is because investing in Class B shares is usually more costly. If a broker fails to assess suitability or recommends an investment in Class B shares despite knowing that it is not appropriate for the investor, this may be considered mutual fund fraud.
Failure to Disclose Mutual Fund Share Classes
Similar to corporations, mutual funds often offer multiple classes of shares with different rights and fees. For instance, Class A shares in a mutual fund may involve an upfront sales charge, while Class B shares may involve annual administrative fees and a commission based on the fund’s performance that is paid at a later date. If a broker sold you shares without giving you the option to choose between classes, you may have grounds for a claim of mutual fund fraud.
How to Spot Mutual Fund Fraud
Some common indicators of mutual fund fraud include:
- Excessive charges accrued to your mutual fund account that are not offset sufficiently by your profits.
- Unauthorized changes to your mutual funds.
- Unusually concentrated or volatile mutual fund investments that your broker has recommended.
If you have noticed these or other signs indicating your stockbroker may be engaging in mutual fund fraud, it is important that you seek advice quickly. Any losses you have already incurred may continue to adversely affect your investment portfolio, so it is in your best interests to contact a mutual fund fraud lawyer promptly and recover any losses as soon as possible.
How a Mutual Fund Fraud Lawyer Can Help
It can be challenging to identify when mutual fund fraud has occurred, and it can be even more difficult to provide evidence of it. In cases of excessive fee claims, it must be demonstrated that the fees were excessively high and not reasonably related to the services provided. Additionally, it must be shown that the fees were so unreasonable that they could not have been the result of a fair and unbiased negotiation.
To succeed in a claim of mutual fund fraud, it is necessary to provide strong evidence that the fund company acted negligently. This may involve a thorough analysis of the specific circumstances of your case and may require the testimony of securities analysts and other experts. Although the process of gathering and presenting this evidence may be complex, a knowledgeable mutual fund fraud lawyer can help you navigate the process and fight for the compensation you deserve.
If you have experienced financial losses due to investments in mutual funds through a broker or brokerage firm, it is important to speak with the legal team at Colling Gilbert Wright about your options for recovery. Our mutual fund fraud attorneys understand the impact that such losses can have on investors and are here to help you explore your options for seeking compensation.
Call Our Florida Mutual Fund Fraud Attorney for Free
If you’ve been the victim of mutual fund fraud, contact a Florida mutual fund fraud lawyer at Colling Gilbert Wright today. We can help you recover losses incurred by fraudulent investment advisors.Contact us online or at (800) 766-1000 for a FREE case evaluation. We serve clients throughout the state of Florida and Nationwide.