Capital Gazette wins special Pulitzer Prize citation for coverage of newsroom shooting that killed five

State settles high-risk bond case Company agrees to offer $300,000 to 1,400 clients.

THE BALTIMORE EVENING SUN

The state attorney general's office has settled charges against a New York mutual fund over its sales of high-risk "junk" bond mutual funds to Maryland investors. The firm, First Investors Corp., has agreed to offer $300,000 to 1,400 investors, but did not admit any wrongdoing in the settlement.

The state contended that First Investors, which has a branch office in Columbia, ignored laws requiring securities dealers to make sure that the investments they sell are appropriate for clients, said Assistant Attorney General Melanie Senter Lubin, chief of the Investment Adviser/Broker-Dealer Unit in the attorney general's office.

For example, the law would prohibit selling high-risk investments to people who should invest conservatively because they can't afford to lose any money.

"Brokers have an obligation to follow a 'know your customer' rule," Ms. Lubin said. "They took people who were right out of school, gave them scripts, and had them sell junk bond mutual funds to people who couldn't afford to take that kind of risks with their money."

Ms. Lubin said the company has settled similar charges with regulators in 10 other states.

She said Maryland regulators began investigating First Investors in 1990. Many Maryland investors came forward after New York's attorney general sued the company.

During the investigation, the company gave Maryland officials the list of 1,400 Maryland investors known to have bought shares in the funds, Ms. Lubin said. She said many of them were friends and relatives of First Investors Corp.'s sales people.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
64°