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NASD Alleges Dean Witter Misstated Risks on Bond Mutual Funds
The NASD has filed a complaint against Morgan Stanley Dean Witter, alleging that it misstated the risks of $2.1 billion of closed - end bond funds sold in 1992 and 1993, known as the TCW/DW Term Trusts. Dean Witter denies the charges.
Nearly 30,000 investors lost $65 million when interest rates rose in 1994 and the value of the funds plummeted by 30%, according to the NASD complaint. The NASD charges that Dean Witter's marketing materials, sent to the firm's brokerage force, and not to investors, failed to include critical information about the risks and the volatility of the three funds. The NASD states that Dean Witter presented these bond funds to its brokers as being safe and simple, suitable for virtually all investors as a high quality alternative to CDs.
Source: Wall Street Journal, November 21, 2000
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