Breakpoint Extensions for Notifying Customers Who Purchased Class A Share Mutual Funds Only Via Paper Applications Submitted to Mutual Funds

NASD has learned that some members that have been directed to provide customers with written notification regarding the availability of breakpoint refunds are experiencing unforeseen logistical difficulties in meeting the January 15, 2004 deadline with respect to some customers. The logistical difficulties have arisen in connection with notifying customers that purchased Class A shares only by submitting paper applications and checks directly to mutual funds (“Paper Application Customers”). Due to the manner in which these paper application transactions are processed, the mutual funds and their transfer agents, rather than the member firms, may have the current account information for these customers, including the name and address associated with these accounts.

 

To notify Paper Application Customers, firms must examine their own paper records or obtain electronic records from the mutual funds. NASD has been informed that both processes are more time consuming than anticipated and that the associated logistical difficulties will prevent some firms from notifying Paper Application Customers by the January 15, 2004 deadline set forth in NASD’s November 3, 2003 letter.

 

Accordingly, NASD has determined to extend the deadline for firms to notify paper application customers until Tuesday, February 17, 2004. This extension applies only to the notification to Paper Application Customers. Firms must notify all other customers by the original deadline of January 15, 2004.

 

As part of its examination program, NASD will examine firms for compliance with all deadlines associated with the breakpoint refund process. All firms that wish to rely upon the extended deadline for notifying Paper Application Customers should keep a list of all such customers and the records necessary to demonstrate that the Paper Application Customers purchased Class A shares exclusively via paper applications since January 1, 1999.