Professional Representation for Victims of Closed-End Fund Securities Negligence and Fraud

When closed-end funds prove to be a bad investment

The securities fraud attorneys at Frankowski have seen firsthand how retirement plans can be destroyed and dreams crushed when investors give bad advice or favor themselves before the needs of the investors. Our lawyers understand the complexities of closed-end funds and alternative securities options. Richard Frankowski. has been fighting aggressively for investors who have lost money due to broker negligence or fraud for over 15 years. His legal team has a strong record of success in front of securities arbitration panels and in other forums.

What are the similarities and differences between closed-end funds and open-end funds?

While a closed-end fund has several unique characteristics that distinguish it from an open-end fund, it also shares several similarities. Both closed-end and open-end funds:

  • Are professionally managed
  • Can generate income and make capital gain distributions
  • Charge an annual expense ratio

However, there are some characteristics unique to CEFs:

  • A closed-end fund only raises capital once
  • Closed-end funds typically focus on one specific industry or industry sector
  • Closed-end funds also can focus on a geographical area
  • Closed-end funds are priced throughout the day while open-end funds are priced at the end of the day or one specific time during the day
  • Closed-end funds are priced differently than open-end funds

What are the dangers of closed-end fund investments?

There are some key risks to investing in closed-end funds. There is a strong chance that the fund’s assets will be distributed, and CEF investments include broker fees and costs on the original IPO as well. Every time a closed-end fund is bought or sold, the broker receives an additional commission.

Brokers have an incentive to repeatedly buy and sell these funds to make a lot of money off of commissions. Because closed-end funds tend to be concentrated, investment portfolios may not be properly diversified.

What questions should investors ask about closed-end funds?

FINRA recommends that investors ask their broker or brokerage firm the following:

  1. Are closed-end funds suitable for the investor’s objectives?
  2. What is the investment strategy for the closed-end fund?
  3. What portion of the price paid per share in an IPO will be invested?
  4. What tax considerations are there?
  5. How is the distribution rate set?
  6. Are the shares trading at a premium or discount to Net Asset Value (NAV)?

Our securities negligence attorneys also understand that the price the closed-end fund trades for depends on supply and demand. Closed-end funds often trade at a premium or discount to its NAV.

Strong counsel when closed-end fund investments fail to perform

If you have suffered losses due to a closed-end investment, you may have an actionable case. Claims can be based on the failure of the broker to fulfill its fiduciary duty to make proper disclosures, failure to advise about suitable alternatives, and failure to diversify. Brokerage firms may be liable for failing to supervise their brokers. For help now, please contact the professional trusted securities fraud attorneys at The Frankowski Firm. Call our legal team at 888-741-7503 or complete our contact form to schedule an appointment.