The Arkansas Securities Department announced Tuesday that it fined a broker $50,000 and suspended his license for two weeks after a probe into alleged fraudulent mutual fund sales
The Arkansas Securities Department announced Tuesday that it fined a broker $50,000 and suspended his license for two weeks after a probe into alleged fraudulent mutual fund sales.
Steve Kiefer, owner of Apple Tree Investments Inc. and the host of a radio show on investments, signed a consent order with the department to settle allegations that his clients paid excessive fees for unsuitable mutual fund investments.
Kiefer, who hosts "The Steve Kiefer Show" on Little Rock radio station KARN, denied in an interview with the AP that he had charged too much.
The order says Kiefer invested money from new clients in mutual funds that incurred no charge to the customer, but the mutual funds paid Kiefer a 4 percent commission. In a few months Kiefer would move the client's money to Class B or Class C mutual fund shares, for which clients paid a percentage to the mutual funds when the shares were sold, the order said.
Kiefer would get part of the commission from the mutual fund company.
The Securities Department said the switch to different mutual funds had been ill-advised and put an unnecessary burden on Kiefer's customers.
"In spite of the fact that it is common knowledge throughout the mutual fund industry that Class A shares offer numerous discounts and long-term investment performance advantages for purchases of this magnitude, Kiefer failed to disclose those material facts to (the customers) and failed to recommend suitable securities to these customers," said the order, signed by state Securities Commissioner A. Heath Abshure.
"There were no reasonable grounds for Kiefer and Tapson to believe that the recommendations that these customers purchase Class B and/or Class C shares were suitable for said customers," the order said.
Under the order, a former Apple Tree broker, Mitch Tapson, was fined $5,000, and barred from working as a broker until he can find an employer who will offer him a year of "heightened supervision" of his trades. The order also calls for Apple Tree to hire a new licensed supervisor and to revise its materials, procedures and training.
Kiefer agreed to pay a $50,000 fine. He said his offices remained open and that he was continuing to work as an investment adviser while he was suspended from brokering. The two are governed by separate licenses.
Kiefer said customers benefited from the investment change after the stock market crash because they paid back-end load commissions — a percentage based on the value of the shares at the time the customers sold, when the investments were worth less.
He accused the department of frightening his clients, and noted that the order did not require him to return any money to clients.
"No client was financially hurt," Kiefer said. "If this is so egregious ... why didn't they cease and desist my business a year ago? The facts just don't add up.
"If you look at the things that aren't in there, that tells the true story," Kiefer said.
Reed R. Edwards, an attorney with the Securities Department, said the agency was alerted to the prospect of irregularities at the business, but said it would violate policy to identify the complainant.
Kiefer said none of his customers has complained to the department.
Edwards said the agency handles issues that could affect a broker's license and doesn't regularly pursue restitution for affected customers, though that sometimes could be part of a consent order.
Kiefer also lists Kiefer Retirement Services Inc. as his business. The Web site for the office tells prospective customers to bring their financial information, as well as their "dreams and goals for the future. Don't dismiss this folks!!! What is retirement without dreams and hopes? We want to know what those are, even if you think they sound silly."
