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Investment Fraud Lawyer for Victims of Mutual Fund and Variable Annuity Switching

Switching is a form of investment fraud that is unknown to most retail investors. It is only a concern with certain types of assets—including mutual funds and variable annuities—and it is a concern that can be difficult to spot unless you know exactly where to look.

But it is also prevalent, and it can leave unsuspecting investors facing substantial fraudulent losses.

If you believe that you may be a victim of mutual fund or variable annuity switching, you should talk to an investment fraud lawyer promptly. Switching violates both federal law and FINRA’s rules, and it can provide clear grounds for defrauded investors to pursue claims in FINRA arbitration.

Switching: Do You Have a Claim Against Your Investment Broker or Advisor?

Do you have an investment fraud claim for switching against your investment broker or advisor? Broadly, switching involves buying and selling investment assets for no reason other than to generate fees or commissions. As noted above, it is a particular concern with mutual funds and variable annuities, which are typically long-term investments that often involve substantial transaction fees.

By their nature, mutual funds and variable annuities are also generally diversified—and, as a result, relatively low-risk—investments. This also lends them to long-term holdings. When a mutual fund or variable annuity fits with an investor’s overall investment strategy, there is typically little (if any) reason to sell (or switch) assets, and there is certainly no reason for a broker or advisor to be conducting these transactions on a regular basis.

Grounds for Pursuing a Mutual Fund or Variable Annuity Switching Claim

With this in mind, when brokers and advisors engage in switching, investors will often have grounds to pursue claims in FINRA arbitration. For example, investors may be able to file claims based on:

1. Account Churning

Account churning, also referred to as excessive trading, involves a broker or advisor abusing his or her access to a customer’s account in order to generate fees and commissions. When brokers and advisors conduct transactions solely for the purpose of enriching themselves—and especially when they do so at their clients’ expense—this is a clear breach of their fiduciary obligations.

2. Unsuitability

While switching mutual funds or variable annuities is not inherently fraudulent, brokers and advisors may only recommend switching when doing so is suitable for their clients. When making suitability determinations, brokers and advisors must consider several factors, including (but not limited to):

  • The investor’s age and employment status
  • The investor’s risk profile
  • The investor’s investment objectives and time horizon
  • The investor’s level of sophistication
  • The investor’s other liquid and illiquid assets

An investment transaction can also be unsuitable because of the costs involved and/or the lack of benefits for the investor. For example, if switching mutual funds involves substantial costs and is not likely to generate any additional investment returns, this should lead to a determination of unsuitability.

If switching mutual funds or variable annuities is unsuitable for a particular investor, then recommending or executing a switch constitutes a fraudulent brokerage or advisory practice. This is true regardless of whether the broker or advisor discloses the lack of financial benefits—although, in many cases, investors who have unsuitability claims will have claims based on inadequate disclosures as well.

3. Conflicts of Interest

Variable annuity and mutual fund switching cases can also involve claims for conflicts of interest. Typically, if a broker or advisor recommends or executes a transaction that is of no financial benefit to an investor (or that results in financial losses for an investor), there will be a conflict of interest involved.

In most cases, this conflict of interest involves generating fees or commissions at the client’s expense. This is a clear breach of brokers’ and advisors’ duties to their clients—and it provides clear grounds for investors to seek to recover their losses in FINRA arbitration. If you have concerns (or evidence) that your broker or advisor has not acted with your best interests in mind, you should talk to a lawyer about taking legal action as soon as possible.

Pursuing an Investment Switching Claim in FINRA Arbitration

Let’s say you have a claim for switching (or you think you may have a claim for switching)—what should you do? In this scenario, there are a few steps that you will want to take promptly:

  • Collect Your Account Records – If possible, you should collect your account records dating back prior to the transaction (or transactions) in question. If you aren’t sure exactly what your account records show, that’s completely fine. A lawyer at our firm can examine your account’s transaction history and determine if you have a switching claim against your investment broker or advisor.
  • Keep All Relevant Messages and Emails – Along with collecting your account records, you should also try to preserve all relevant communications. This includes text messages, direct messages through your brokerage firm’s online account, and emails (including any attachments). For now, you should keep all communications between you and your broker or advisor. Your lawyer will be able to sift through your communications and determine which ones are relevant to your claim.
  • Talk to an Investment Fraud Lawyer – To pursue a switching claim against your broker or advisor, you will need experienced legal representation. With this in mind, you should talk to an investment fraud lawyer as soon as possible. At Zamansky LLC, we represent defrauded investors in FINRA arbitration on a contingency-fee basis, which means it costs nothing out-of-pocket to hire a lawyer at our firm to represent you.

Discuss Your Switching Claim with an Investment Fraud Lawyer for Free

Do you need to talk to a lawyer about filing a mutual fund or variable annuity switching claim against your broker or advisor? If so, we encourage you to contact us right away. To discuss your legal rights with an experienced investment fraud lawyer at Zamansky LLC in confidence as soon as possible, call 212-742-1414 or request a free consultation online now.

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“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

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“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

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“Jake Zamansky represented me in a FINRA arbitration case which allowed me to recover a substantial portion of investment losses. He is truly an expert in this space and I would highly recommend him to those investors who may have been been a victim of investment fraud.”

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