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FINRA

FOR RELEASE:
CONTACTS:
Tuesday, February 18, 2003
Nancy A. Condon 202-728-8379
Michael Shokouhi 202-728-8304



 

NASD Announces Joint NASD/Industry Breakpoint Task Force

Washington, DC — NASD announced today the formation of a 22-person task force to recommend ways in which the mutual fund and brokerage industries can assure that investors are not overcharged when they purchase mutual funds with front-end loads.

 

Typically, mutual funds offer an investor a reduction in sales loads as the dollar value of the shares the accounts of the investor, a member of his or her family and other related account reach specified levels, called “breakpoints.” After routine examinations by NASD found that investors do not always receive the correct discounts, the SEC asked NASD, supported by the Securities Industry Association and the Investment Company Institute, to spearhead the formation of the task force. The Task Force will explore and recommend operational changes and ways to improve investor education in this area and explore the potential for simplifying or enhancing disclosure of breakpoints.

 

“Solving this problem is critical for investor protection, and the formation of this task force is an important step in that direction,” said Robert Glauber, chairman and CEO of NASD. “Our members have an obligation to ensure that customers receive the discounts promised by the mutual funds. NASD, working with the SEC, NYSE and the securities and mutual fund industries, is committed to helping investors receive restitution for missed breakpoints and ensuring going forward that they receive the discounts they are entitled to.”

 

Mary L. Schapiro, Vice Chairman, NASD and President, Regulatory Policy and Oversight, NASD will chair the Task Force. She will be joined by Stuart J. Kaswell, Senior Vice President and General Counsel, SIA, and Craig S. Tyle, General Counsel, ICI, and Elisse B. Walter, Executive Vice President, Regulatory Policy and Oversight, NASD. The following members of the securities industry are members of the Task Force:

 

  • William C. Alsover, Jr., Chairman, Centennial Securities Company, Inc.;
  • Barry P. Barbash, Partner, Shearman & Sterling;
  • Ann Bergin, Managing Director, Mutual Fund Services, Depository Trust and Clearing Corporation;
  • Jonathan Boehm, Group Vice President, DST Systems, Inc.;
  • Stephanie L. Brown, Managing Director, Compliance and General Counsel, Linsco Private Ledger Corporation;
  • Karnig H. Durgarian, Senior Managing Director, Putman Investments;
  • Terry K. Glenn, Chairman of the Americas and President of ML Funds, Merrill Lynch Investment Managers;
  • Tony Green, President, AIM Fund Services, Inc.;
  • Joseph B. Gruber, President and CEO, FSC Securities Corporation and Advantage Capital Corporation ;
  • Paul G. Haaga, Jr., Executive Vice President, Capital Research and Management Company;
  • George Hrabovsky, President, Alliance Global Investor Services, Inc.;
  • Ron Kessler, Vice Chairman and Executive Vice President, A.G. Edwards & Sons, Inc.;
  • Edward Kwalwasser, Group Executive Vice President, New York Stock Exchange;
  • Jeffrey M. Lyons, Executive Vice President, Asset Management Products and Services, Charles Schwab and Co. Inc.;
  • Norman R. Malo, President and Chief Operating Officer, National Financial Services Corporation;
  • Brian T. Shea, Chief Operating Officer, Pershing, LLC;
  • Erik Sirri, Associate Professor, Babson College; and
  • Michael Stone, Managing Director and IIG General Counsel, Morgan Stanley, Dean Witter.

 

In Notice to Members 02-85, accompanied by a letter from the Directors of the SEC’s Division of Market Regulation and Investment Management, http://www.nasdr.com/pdf-text/0285ntm.pdf, NASD recently directed its members that sell mutual fund shares with front-end sales loads to immediately review the adequacy of their policies and procedures to ensure that investors are charged the correct sales loads on mutual fund transactions. The Breakpoint Task Force is intended to identify and guide the implementation of a more uniform and cost-effective solution to supplement or replace corrections crafted by individual firms.

 

NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web Ste at www.nasd.com.