Questions and Answers:Finding the best investing services are very difficult and we provide you with information and a portal to making that decision easy. We at InfoFAQ have asked the experts some frequently asked questions about finding investment firms and Investing planning services online.
Frequently Asked Questions About Investment Firms Online
What is a 12b-1 fee added to many mutual funds?It is widely noted as a distribution expense in the prospectus of most mutual funds. This is a bit unclear! It is nothing more than a trailing sales commission paid annually to the stockbroker that sells the fund and can run as high as 1.00% per year on top of regular mutual fund management fees.
Are new account investor profiles obtained by stock brokerage firms required by securities regulations to be provided to customers?No they are not. These are the internal forms or questionnaires that are utilized by brokerage firms to gauge the customers background, investment objectives and risk tolerance. They are the most important form the brokerage firm maintains to meet its “suitability” obligation to the customer. Management turns immediately to this form for purposes of supervision of the broker handling the customer’s account. Investors should ALWAYS demand to see their internal new account profile to see what investment objectives and risk tolerance is noted on this form. Brokerage firms must provide this form when requested by the customer. Only best practice firms provide it voluntarily. Many investors will be surprised to learn that the brokerage firm considers the investment objectives of the customer to be “Growth & Speculation” with a risk tolerance of “Aggressive” This is tantamount to a “get-out-of-jail-free card for the brokerage firm if and when the customer takes them to securities arbitration.
Can a customer sue a brokerage firm and take them to court?No! This is because brokerage firms have lobbied to have an arbitration clause inserted in the New Account Agreement signed by every customer who does business with them. The arbitration clause normally indicates that the only recourse to the investor to satisfy any complaint against the broker or the firm is to take them to arbitration as opposed to a court of law. Forums are normally Self-Regulatory Organizations (SRO’s) such as the NASD or the NYSE.
Does the arbitration forum favor the investor?Yes it does! Investors are prevailing against brokerage firms 55% of the time in arbitration. Further, arbitration is a much quicker and less costly process than the courts.
Should a disgruntled customer represent themselves in arbitration?
No, this is not a good idea. Pro se investors (those that represent themselves) have a fool for a client and lose in arbitration more often than not. Normally, with a good case that has real causes of action, an ethical securities attorney will take the investor’s case on a contingency rather than on an hourly basis. This participation usually runs between 30% and 35% of any award that the investor receives in arbitration.
Answers courtesy of Fend
Consumer Investment Fund www.in.gov
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Consumer Business and Lending Initiative Investment Program.
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