Mutual Fund Switching

Securities Law Attorney Representing Los Angeles Investors and Others

Investors trust their brokers to make the most of their finances and to guide them when it comes to making complicated investment decisions. Many investors lack experience and turn to a broker to obtain his or her seasoned guidance. Unfortunately, some brokers take advantage of this trust and dependence and abuse it. One of the most common ways that brokers engage in fraud against their investor clients is through mutual fund switching. This practice involves switching the client’s investments between different mutual funds, which are intended to be long-term investments, simply for the sake of creating another commission. Dedicated Los Angeles securities law lawyer Steve A. Buchwalter has provided diligent legal guidance and representation to investors throughout Southern California. If you have been burned by your broker, let Attorney Buchwalter put his skills to use for you.

Recognizing Mutual Fund Switching

Since they are not experts, many investors fail to recognize when mutual fund switching is taking place with their investments. In general, investors can switch between different mutual funds sponsored by the same company at no cost. In general, transferring funds between mutual fund investments of two different mutual fund companies constitutes broker negligence if the mutual funds have similar financial purposes and the broker cannot identify a legitimate investment purpose for switching the investment to a new mutual fund. As most mutual fund companies offer many different funds, it is hard not to find another fund within the same company that would meet a investor’s needs at no cost.

Mutual funds are typically identified as potential investment options due to their ability to provide portfolio diversification. They are generally intended to be owned by the investor for a substantial period of time because an investor may incur a hefty charge (that does not exist for common stock) when buying or selling mutual fund investments. Also, according to the Financial Industry Regulatory Authority (FINRA), mutual fund switching constitutes a sales practice violation.

Hold a Negligent Financial Advisor Responsible for Your Losses

According to the law, a broker is in a fiduciary relationship with his or her investor. This relationship carries with it a heightened responsibility, or duty of care, that is designed to take account of the superior knowledge that brokers have compared to their clients when it comes to making an investment.

An investor who believes that his or her broker has engaged in mutual fund switching may bring a claim seeking damages for any losses that he or she may have incurred. It would be important to prove that a reasonable broker acting in good faith would not have made the same decision. Also, the losses must have resulted directly from the breach of fiduciary duty, such that they would not have happened if not for the breach. An investor who successfully proves that a broker engaged in mutual fund switching may be entitled to recover the difference between the actual value of his or her accounts and the estimated value of his or her accounts had the broker’s negligence or misconduct not occurred.

Seek Guidance from a Securities Law Lawyer in the Los Angeles Area

You may be entitled to compensation for any harm caused by the negligence or fraud of an investment professional. Los Angeles securities law attorney Steve A. Buchwalter has accumulated substantial previous experience working as a stockbroker, which means that he knows which rules and regulations apply to your broker and whether a breach of duty may have occurred. He represents investors throughout Southern California, including in Beverly Hills, Pasadena, Newport Beach, Irvine, Santa Barbara, and other cities across Los Angeles, Orange, and Ventura Counties. Call broker fraud attorney Steve A. Buchwalter at 818-501-8987 or contact us online to set up a free consultation.