The SEC last week won a key case in its efforts to discourage registered representatives from selling class B shares of mutual funds when cheaper A shares are available.

Two registered representatives and an investment advisor violated federal securities laws when the representatives deliberately structured investors' purchases of class B shares of mutual funds in a way that earned them higher commissions at the expense of their customers, an SEC administrative law judge ruled last week. Judge James T. Kelly fined and temporarily barred Michael Flanagan and Ronald Kindschi from working for broker/dealers for failing to explain fully to customers that the customers' large B-share purchases of mutual funds could have been done more cheaply had the investors purchased A shares.

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