By James Langton

(December 4 – 17:40 ET) – The Securities and Exchange Commission has sanctioned a broker in the United States for churning client mutual fund accounts and not disclosing the cost of deferred sales charges.

The SEC has suspended former Dean Witter Reynolds rep Leslie Rossello from association with any broker-dealer for 12 months. It ordered her to cease and desist from violating the law, and also ordered her to pay a civil penalty of US$10,000. Rossello consented to the order without admitting or denying the commission’s findings.

The SEC found that on 48 different occasions, from March 1994 through November 1996, Rossello engaged in mutual fund switching to the detriment of her customers. It concluded that Rossello induced the switches for her benefit rather than that of her customers. It says that as a result of these transactions, Rossello increased her commissions while her customers incurred approximately $157,000 in sales charges.

The SEC also found that in connection with the switches, Rossello misrepresented and omitted to inform those customers of material facts, including the payment of DSCs, the amount of those sales charges, and the option of exchanging their fund shares for another mutual fund in the same family of funds at little or no cost.

The commission also found that Rossello failed to disclose the unsuitable nature of the frequency of these switches to her customers, notwithstanding that she knew that mutual funds are generally long-term investments and not suitable for short-term trading.