Chicago-based Stoltmann Law Offices is investigating financial advisors who switch clients into more expensive mutual funds that trigger unnecessary fees. Brokers often like to switch clients’ assets from one mutual fund class into another. Although they pitch these “trades” as more profitable for investors, they are making more money in fees and commissions.
FINRA, the federal securities industry regulator, has settled charges with two broker-dealers “for years of poor supervision of short-term mutual fund trades.” According to Investment News, on Dec. 22, FINRA “penalized Emerson Equity $1.7 million. A week later, FINRA hit an Advisor Group broker-dealer, Triad Advisors, with $705,000 in penalties, also for poor supervision of sales of the LJM Preservation & Growth Fund, an alternative mutual fund that closed in 2018.”
Emerson ran into problems from 2015 to 2020, Investment News notes, “when the firm and its CEO and founder, Dominic Baldini, failed to put into place a variety of systems to monitor short-terms trades of mutual fund Class A and Class B shares. Such systems would have enabled the firm to comply with FINRA’s suitability rule.”