Closed End Funds

Stock Fraud Lawyers Helping Investors Nationwide

Also known as a closed end investment or a closed end mutual fund, a closed end fund is a type of publicly traded investment company that raises a set amount of money from investors through an initial public offering (IPO). Only a fixed amount of shares are sold through them. The funds are then listed and traded like stocks on a stock exchange. They can vary in their investment objectives, portfolios, and strategies, which means that they can carry a wide range of risks, fees, and volatility. The stock fraud attorneys at Fitapelli Kurta are committed to representing investors in claims against brokers and other investment professionals, including those that arise from closed end funds. We serve investors in New York and throughout the United States, using our skills in arbitration and other avenues of legal resolution as well as our tenacity in litigation.

Risks Associated with Closed End Funds

While high distribution rates have made closed end funds a popular investment tool, the policies of these funds are not always clear. They generally pay amounts to investors on a monthly or quarterly basis. However, sometimes portions of a fund’s assets are also distributed to people who have invested in it. This practice can increase the risks associated with this style of investment.

In addition, investors should be aware that the money they pay for shares in a closed end fund includes a portion that will automatically go to brokers’ fees and expenses. Therefore, a broker needs to be candid in articulating the amount of an individual’s money that will actually be invested. Finally, different closed end funds have different investment strategies, and market conditions can drastically affect their performance. If a fund uses leverage, or debt, as part of its strategy, its shares may become more volatile, which can result in losses for investors. It is important to understand which approach a fund uses for distribution to completely understand the level of risk involved and decide whether you should invest in it.

Take Legal Action to Recoup Your Losses

Fortunately for investors, closed end funds are regulated by the Securities and Exchange Commission (SEC), which requires certain conduct by investment professionals. Brokers for closed end funds owe their clients a duty to deal fairly. This means that they must disclose certain investment-related information as well as any conflict of interest. Brokers also have the duty to charge reasonable prices, depending on the market. Importantly, they must recommend investments that are in line with their clients’ overall goals. To do this, the broker needs to have an idea of an individual’s current financial situation, including other funds where they may have invested or planned to invest.

Since brokers are paid a commission whenever a closed end fund share is bought or sold, the repeated turnover of these shares can be financially lucrative for them. As a result, many investors have spent a considerable amount of money in fees without ever realizing any profit on their investments. If you have been advised to invest in closed end funds and paid your broker significant fees, only to lose money, you may be able to take legal action.

Contact Attorneys Knowledgeable in Investment and Securities Fraud

If you or someone you know has experienced deceptive practices with respect to a closed end fund’s distribution or yield, there is no need to accept your losses with resignation. Take the first step to resolving your financial difficulties by consulting the investment fraud lawyers at the nationally recognized law firm of Fitapelli Kurta. We are experienced in state and federal investment laws and are ready to discuss your case at your convenience. Call (877) 238-4175 or complete the online form on our website to set up a free consultation with one of our attorneys.