To assist the financial industry in fulfilling its obligation to provide all available breakpoint discounts on sales of Class A shares of front-end load mutual funds, the Joint NASD/Industry Task Force recommended that broker/dealers require registered representatives to complete standardized checklists or worksheets, which record the relevant account data, when executing Class A shares transactions. See Report of the Joint NASD/Industry Task Force on Breakpoints, pp. 13, Recommendations E, F. To assist members firms in implementing this Task Force recommendation, NASD and an industry working group, led by William Alsover of Centennial Securities, have developed a Breakpoint Checklist and Breakpoint Worksheet, which are designed to help members and associated persons gather the information necessary to deliver available breakpoint discounts. The Checklist provides an outline of the questions that should be asked to gather the information necessary to deliver breakpoints and the worksheet is designed to record the pertinent information.
FINRA believes that use of these documents will aid members and associated persons in gathering the information necessary to deliver breakpoint discounts on eligible transactions. These documents are provided as "guidelines," which members may wish to use; members may wish to tailor these guidelines to reflect the rules of the mutual funds that they sell, their business models, or their record keeping systems. Thus, firms may want to edit these documents to reflect the specific rules of the mutual funds that they sell by including definitions of the term "related parties" or by asking for current value or historical cost, depending upon the rules of the mutual fund.
Although FINRA believes that use of these documents will facilitate the full and accurate delivery of breakpoint discounts, members are reminded that registered representatives must understand the terms upon which mutual funds offer breakpoints, including the rules regarding rights of accumulation, letters of intent, and valuation, to ensure the delivery of breakpoint discounts. Thus, use of these forms does not diminish members' obligation to train and supervise registered representatives that sell mutual funds. Likewise, use of these forms does not constitute a "safe harbor" with respect to a member firm's obligation to comply with applicable rules and regulations.
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