Mutual Fund Switching is a violation of Industry Rules

Mutual Fund Switching is a violation of Industry Rules and it is well settled that mutual funds have long been categorized as suitable only as long-term investments and not a vehicle for short-term trading. A pattern of switches from one fund to another where there is no indication of a change in the investment objectives of the customer is not reconcilable with the concept of suitability. Mutual Fund Switching occurs when a broker or advisor is excessively buying and selling stocks and mutual funds. Class A funds have sales loads or commissions that generally last 6 years; that is why trading different families of mutual funds has resulted in sanctions and discipline for the brokerage firms and representatives that permit this pernicious practice. The short term trading of long-term investments is patently unsuitable for investors with liquidity needs. It may be a violation of Industry Rules if a broker or advisor is aware of a client’s liquidity needs and continues to recommend speculative and short term trades for the accounts when there is no change in the client’s investment objective that justified the trading pattern.

Have You Suffered Losses Due to Mutual Fund Switching? Recover Your Losses!

When a broker or advisor practices improper and abusive mutual fund switching, directly contrary to the basic premise of proper asset allocation, the client’s portfolio may have no meaningful diversification among the major asset classes. A broker or advisor’s recommendation to make mutual fund switches may be completely inappropriate for the client’s needs.

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