What is FINRA Rule 2010? FINRA Rule 2010 is a broad, sweeping rule that is utilized to address misconduct that is not directly addressed by another FINRA rule. The rule is centered around the use of ethical business practices by brokers and financial institutions....read more
Most stock brokers make money on a per-transaction basis. This means that each trade they make often nets them a fee, which adds up to a substantial part of their pay. This gives them the incentive to make as many trades as possible – which may be something they try to hide from you. As an investor, you have the right to know what fees you will face for your financial services. These kinds of things should be clear, and your broker should discuss these fees with you. If you were slapped with unconscionable charges or surprise fees, you may be entitled to compensation from your stock broker. Talk to a FINRA arbitration lawyer like those at Epperson and Greenidge today to see if you might have a case against your broker.
Brokers Must Disclose Fees and Charges for Their Services
One of the biggest things that the Financial Industry Regulatory Authority (FINRA) aims to prevent is stock brokers and other financial advisors who prey on their investors. Many explicit scams and indirect, unethical conduct harms the financial industry every day. One example of this is hidden fees and unacceptable brokerage agreements.
It is important in any transaction to ensure that both parties are working with full information, especially with regard to price. Some financial advisors are very clear in the terms of their contracts how their fee structure works. FINRA has tools on its website to help you understand and analyze the fees you may face. They also enforce strict regulations dealing with what your broker must disclose to you.
First, every mutual fund has a document called a “prospectus,” which the broker must give the investor. A prospectus has information about the goals of the account, strategies it will use, risks, and – importantly – the fees and costs an investor will face. This information is essential to being a well-informed investor. The U.S. Securities and Exchange Commission (SEC) requires that every investor be given a prospectus. Failing to give one can mean the broker is violating federal law, as well as FINRA regulations.
If your broker failed to inform you of fees, then billed you for them later, you may be entitled to make a FINRA claim against them. FINRA empowers investors who have been cheated or scammed by bold brokers options to get compensation for the financial harm they faced. Many choose to seek mediation, arbitration, or even litigation against bad brokers. Talk to our FINRA arbitration lawyers today to explore your options.
What Kinds of Hidden Fees Come with Stocks and Mutual Funds?
There are multiple types of fees and charges associated with stock trades and mutual funds. Stock trades may have a specific cut that the broker takes, which is relatively simple to account for. However, mutual funds often have common fees, plus an additional set of situational fees that may come into play in various situations. It is vital to understand these fees before investing, since they play into the overall operating expenses of the fund. If a fund is too expensive to run, your investment may be nothing but a tool for the broker to churn out transaction fees. Allowing you to invest in such a fund may even be an example of financial negligence.
The following are all common fees to look out for. Every time you invest, it is important to understand how much these fees cost for your investment:
- Management fees – These include the costs that the portfolio manager will take as payment for managing the fund.
- Account fees – Some mutual funds charge you a fee simply to maintain your account within the mutual fund. These could be waived in many cases, but, like with bank accounts, these fees may start being charged if your investment is under a certain threshold.
- Exchange fees – Like balance transfer fees and other banking/credit card fees, mutual funds may charge you for moving the balance from one account to another.
- 12b-1 fees – These are annual fees taken out annually to pay for marketing and sales costs, as well as other services. They cannot exceed 1% of your total account value for the year.
- Redemption fees – These fees are often assessed when an account is sold soon after buying it. If that trade is made within a certain time frame after purchase, the account may trigger this fee automatically. Different accounts vary in how long or short the time period is.
- Purchase fees – Some accounts are treated as a purchase at the time they are opened and may incur costs.
There are also other various fees you may face every time the mutual fund makes a trade or sale. These could be large or small amounts, but it is important to understand how they may come into play and what they might cost.
National FINRA Arbitration Lawyers
If you feel like you’ve been duped or tricked into paying exorbitant hidden or undisclosed fees on your investments, talk to an attorney today. If your broker failed to inform you about particular fees or failed to give you a prospectus for your mutual fund, they may have committed financial negligence. Talk to a FINRA lawyer today about what options you have to seek compensation for their professional misconduct. The lawyers at Epperson and Greenidge offer free consultations on new cases. Call (877) 445-9261 today to schedule your free consultation.