Did your financial Adviser or Broker Sell you on dividends?

If you mutual fund pays dividends he may had told you to buy a paticual mutual fund right before it pays a dividend. Or buying mutual fund shares before the ex-dividend date.

Which of the following constitutes selling dividends?

Selling a client on dividends is an unethical sales practice in which a broker intentionally misleads customers into believing they will receive extra dividend income or even high dividend income or the mutual fund will soon pay a distribution. The customer will suffer out-of-pocket losses because the cash immediately coming back is dividend income subject to tax. At the same time, the NAV of the fund is reduced.

EXAMPLE Two days before the ex-dividend date the broker sells the customer a mutual fund. It will pay a dividend of 1 dollar per share. The mutual fund will be lowered by a dollar, the dividend will be paid and then tax is due. Approximately 15%. Their investment will be lost a dollar and they lose 15 cents for every dollar invested