Washington (Aug. 13, 2003) -- NASD has settled four cases involving brokers who violated suitability rules by recommending their customers purchase B share mutual funds instead of A shares.
In each of the four cases, NASD said the purchase of A shares would have eliminated or reduced front-end sales charges through breakpoint discounts; resulted in lower ongoing expenses than those available through B shares; and would have avoided the contingent deferred sales charges associated with B shares.
"In recommending mutual funds with different classes to investors, the broker must put his customer first. It is critical that a broker consider the costs of A shares versus B shares for the customer, and not the profit for the broker," said Mary L. Schapiro, NASD Vice Chairman and President of Regulatory Policy and Oversight. "NASD will continue to bring sales practice cases such as these when investors are sold mutual fund products that are unsuitable."
Qimat R. Goyal, associated with Marsco Investment Corp. of Roseland, N.J., was fined $48,346 and suspended for nine months for unsuitable mutual fund B share recommendations to five customers. Keith Korch, associated with Tucker Anthony Inc.'s Sturbridge, Mass. office, was fined $60,000 and suspended for 30 days for recommending the purchase of $3.5 million in B shares to a customer. James Wheeler of James Wheeler & Co. Inc. of Denver, Colo. was suspended for 10 business days and the firm was fined $8,600 for recommending unsuitable purchases of B shares in 20 funds from 15 fund families to a customer who should have purchased A shares. Robert Barmen, associated with UBS Financial Services Inc.'s Pittsburgh office, was fined $2,500 and suspended for 10 business days for unsuitable B share recommendations.
In a fifth action where the broker is contesting the charges, Paul Pallo, a registered representative with Staten Securities of Staten Island, N.Y., was charged in a complaint with selling B shares to two customers when Class A shares would have been more suitable.
-- WebCPA staff
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access