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NASDR Censures and Fines Stifel, Nicolaus & Company and Brokers Over Fund Share Classes
NASD Regulation has found that the Stifel, Nicolaus & Company and two of its brokers made unsuitable recommendations when they sold investors Class B mutual fund shares instead of Class A mutual fund shares, which would have been more cost effective.
Class A shares bear an up-front sales load (commission). Class B shares do not bear an up-front load but do have a contingent deferred sales charge (decreasing to zero usually in 6 years) and a higher annual expense ratio than A shares. Additionally, the up-front sales load on A shares may be discounted if an investor makes a large purchase, already holds funds in the same fund family, or commits to regularly purchasing the fund's shares.
NASDR concluded that the investors would have paid less than one-half of what they paid had they bought the A shares.
Source: NASD Regulation News Release, April 18, 2001
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
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