U.S. SEC set to take aim at costly mutual funds, bad brokers

An official at the SEC recently hinted that pricey mutual funds known as “L shares” will be a priority when auditing B-Ds and RIAs next year. L shares are mutual fund shares that are usually held in variable annuities. Unlike other annuities these shares provide a shorter surrender period, meaning an investor can withdraw or cash in an annuity without a penalty in less time. The problem is that brokers demand higher commissions for these annuities attached to L shares. The SEC will audit to check if these annuities are being sold to benefit the client, or solely for higher fees.