Many brokers touted Easterly ROCMuni for its yield without explaining that the higher income stemmed from speculative holdings and borrowed money. Others failed to mention ongoing 12b-1 fees or distribution charges that eroded returns. Those omissions strike directly at the heart of the Disclosure and Care Obligations under Reg BI.

According to its prospectus, the Easterly ROCMuni High Income Municipal Bond Fund’s primary investment objective was to provide income exempt from federal taxes, and its secondary objective was total return. Investors associate municipal bond funds with safety and stability. The fine print told a different story.