Articles Tagged with Mutual Funds

Stoltmann Law Offices is investigating cases where brokers have overtraded to generate commissions in risky investments. FINRA, the federal securities industry regulator, has fined Next Financial Group, a broker-dealer owned by Atria Wealth Solutions, $750,000 to settle charges that it failed to supervise ‘unsuitable’ trading of mutual funds and municipal bonds by one unnamed broker, according to

FINRA found that the broker “engaged in short-term trading of Class A mutual fund shares in 19 client accounts, resulting in ‘unnecessary’ front-end sales charges of $925,000 from 2012 until February 2019.” All told, the broker racked up some $5 million in sales charges in the seven-year period. Additionally, FINRA found that “from June of 2013 to November of 2016, the broker engaged in short-term trading of Puerto Rican municipal bonds in 16 customer accounts, concentrating five of the accounts in these bonds.”

‘These bonds carried risks not associated with other municipal bonds because of concerns about the Puerto Rican economy and subsequent restructuring of Puerto Rican debt. The risk of such concentration was compounded by frequent trading in the PR Bonds because of the repeated payment of upfront costs that would decrease any investment returns,” FINRA said in its complaint. The investors in the Next case lost more than $4 million from their Puerto Rican bond investments.

The Securities and Exchange Commission (SEC) is ramping up its efforts to maintain liquidity in the markets, after the publication of its annual report on exam priorities for 2016. It said it would require investment funds and advisers to make significant improvements in their risk management practices. Specific areas to address would be liquidity risk management, stress testing, the use of derivatives and transition planning. Mutual funds, investment advisers, exchange-traded funds and other registered investment companies may also be required to enhance their data reporting. Last year, the SEC focused on ensuring retail investors were adequately informed about the risks of investing in more exotic mutual funds. Recently, the SEC investigated the failure of $788.5 million Third Avenue Focused Credit Fund, which blocked clients from getting to their money because the fund couldn’t meet redemptions without selling holdings at steep discounts. Other priorities include advancing a new set of rules for improving equity market structure, develop potential rules for enhanced pre-trade transparency in the fixed income markets, working toward a stronger financial responsibility framework for broker-dealers and developing a uniform fiduciary duty for investment advisers and broker-dealers.

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