frequently recommended the purchase and subsequent sale of Class A shares within a year of purchase. Indeed, on average, the customers held the Class A mutual funds at issue for less than four months. As a result of these short-term trades, five of the six customers suffered collectively losses of approximately $30,254.
If You Buy Class A Shares:Class A shares typically charge a front-end sales charge. When you buy Class A shares with a front-end sales charge, a portion of your dollars is not invested. Class A shares may impose an asset-based sales charge (often 0.25 percent per year), but it generally is lower than the charge imposed by the other classes (often 1 percent per year for B and C shares).A mutual fund may offer you discounts, called breakpoints discounts, on the front-end sales charge if you:
You should ask your financial adviser whether any breakpoint discounts are available to you. For more information, read our Investor Alert Mutual Fund Breakpoints: A Break Worth Taking.
- Make a large purchase.
- Already hold other mutual funds offered by the same fund family.
- Commit to regularly purchasing the mutual fund's shares.If You Buy Class B Shares:Class B shares typically do not charge a front-end sales charge, but they do impose asset-based sales charges that may be higher than those that you would pay if you purchased Class A shares. Class B shares also normally impose a contingent deferred sales charge (CDSC), which you would pay if you sell your shares within a certain period, often six years. For this reason, these shares should not be referred to as "no-load" shares. The CDSC normally declines the longer your hold your shares and, eventually, is eliminated. Within two years after the CDSC is eliminated, Class B shares often "convert" into lower-cost Class A shares. When they convert, they begin to charge the same fees as Class A shares.Class B shares do not impose a sales charge at the time of purchase. So unlike Class A purchases, all of your dollars are immediately invested. But your annual expenses, as measured by the expense ratio, may be higher. You also may pay a sales charge when you sell your Class B shares.If you intend to purchase a large amount of Class B shares (over $50,000 or $100,000, for example), you may want to discuss with your financial adviser whether Class A shares would be preferable. The expense ratio charged on Class A shares is generally lower than for Class B or C shares. The mutual fund also may offer large-purchase breakpoint discounts from the front-end sales charge for Class A shares.To determine if Class A shares are more advantageous, refer to the mutual fund's prospectus, which may describe the purchase amounts that qualify for a breakpoint discount.If You Buy Class C Shares:Class C shares do not impose a front-end sales charge on the purchase, so the full dollar amount that you pay is invested. Often Class C shares impose a small charge (often 1 percent) if you sell your shares within a short time, usually one year. They typically impose higher asset-based sales charges than Class A shares and, since they generally do not convert into Class A shares, those fees will not be reduced over time.Additionally, in most cases, your total cost would be higher than with Class A shares, and even Class B shares, if you hold for a long time.
During her registration with Brighton, the Firm placed CK on heightened supervision five separate times for, among other issues, failing to follow company procedures, placing unauthorized trades in customer accounts, and exercising discretion in customer accounts without written authorization from the customers or Brighton. In addition, on several occasions, Brighton's supervisory personnel raised concerns regarding the "frequency" and "velocity" of CK's trading. And many of CK's short-term mutual fund trades occurred in the accounts of customers who were elderly and/or who had long-term investment objectives and conservative risk tolerances
The Firm had no exception reports specific to Class A mutual fund shares, and no automated method of monitoring Class A mutual fund holding periods. Nor did the Firm impose any limitations on trading or holding Class A mutual funds.
At various times from December 2010 through May 2011, Korn exercised discretionary power in the accounts of eleven customers. Korn, however, did not have written authorization from those customers to place discretionary trades. Moreover, she failed to obtain written acceptance of the accounts as discretionary from the Firm. By exercising discretion in customer accounts without written authority, Korn violated NASD Conduct Rule 2510(b) and FINRA Rule 2010.
CAROLINE WAS TRADING EXCESSIVELY IN SEVERAL ACCOUNTS, GENERATING UNNECESSARILY HIGH COMMISSIONS.
SIDE BAR By Bill: Ummm, if you guys at Brighton don't mind a little bit of friendly advice, you may want to tone down the sexism inherent in filing a regulatory disclosure for a veteran registered representative by calling her "Caroline" when virtually every such filing for a male would likely call the individual "Korn."
EMPLOYEE DISAGREES WITH CLAIM, AND IS CURRENTLY SEEKING LEGAL COUNSEL.