Mutual Fund Breakpoint Information

Millions of Americans invest in mutual funds each year, yet research has shown that many investors are unaware of how much they pay to own mutual funds.

 

Mutual funds with front-end loads, or sales charges, generally enable investors to reduce front-end sales charges as the amount of an investment increases to certain levels, called "breakpoints." This Web Page provides information about mutual fund breakpoints and sales charge discounts for mutual fund transactions. Included are links to news releases, Investor Alerts, and industry reports examining breakpoints transactions.

 

Through its examination program, FINRA identified problems in mutual fund transactions where eligible customers did not always receive the breakpoint discounts to which they were entitled. Since that time, FINRA has taken a number of steps to ensure that investors who did not receive appropriate discounts receive a refund, and to ensure that in the future investors receive any discounts to which they may be entitled.

 

Investors can read an Investor Alert to see whether they may be eligible for a refund based on a missed breakpoint discount.

 

This press release describes some of the steps FINRA has taken to raise investor and industry awareness of this issue and to help investors receive any refunds that may be due to them.

 

Other information described below provides more background on mutual fund breakpoints and actions FINRA has taken in this area.

 

Breakpoint Assessment Information

 


 

Customer Letters About Breakpoint Refunds
In 2003 NASD directed all firms that processed more than a minimal amount of mutual fund transactions using an automated process to conduct a self-assessment of their mutual fund transactions in 2001 and 2002 and the sales discounts provided, and to submit the results to NASD. As of July 30, 2003, the 642 firms listed below submitted assessment results to NASD.

 

Based on an evaluation of those results, NASD then directed about 450 of those firms to send letters and claim forms to their mutual fund customers who purchased Class A mutual fund shares since January 1, 1999, notifying them that they may be due refunds as a result of the firms' failure to provide breakpoint discounts. NASD has advised securities firms not to modify the text of these letters.

 

Whether or not firms were required to send out a customer letter, and which letter the firm was required to send, was based on the firm's evaluation of its delivery of accurate breakpoint discounts. NASD directed almost 175 of those firms with poor records of providing breakpoint discounts to complete a comprehensive review of transactions since the beginning of 2001 for possible missed discount opportunities. Those firms will then be sending out to customers the "Trade by Trade Refund Notification Letter."

News Release
SEC and NASD Announce Actions as a Result of Findings of "Breakpoint" Overcharges on Mutual Fund Transactions (11/03/03)

 

Investor Alert -- Mutual Fund Breakpoints: Are You Owed a Refund?
This alert can help investors determine if they may have been eligible for a breakpoint discount and if they may be owed a refund. (11/03/03)

 

NASD Breakpoint Ad Campaign
NASD ran this advertisement (PDF 32 KB) in a variety of national and regional publications to inform investors about breakpoint discounts and refunds that may be due to them. (11/03/03)

 



Reports and News

 

Reports

News Releases


 

FINRA Publications

 

FINRA Investor Alerts
FINRA Investor Alerts offer the information you need to protect your money and avoid scams and other investing problems. (Investor Alerts on additional topics are also available.)

NASD Notices to Members
Notices to Members provide timely regulatory information about NASD, including reports on amended rules, legal interpretations, and compliance guidelines.

  • NASD Notice to Members 03-47: Refunds to Customers Who Did Not Receive Appropriate Breakpoint Discounts in Connection with the Purchase of Class A Shares of Front-End Load Mutual Funds and the Capital Treatment of Refund Liability
  • NASD Notice to Members 02-85: NASD Requires Immediate Member Firm Action Regarding Mutual Fund Purchases and Breakpoint Schedules

     

 

Additional Information

 

Letters of Acceptance, Waiver and Consent and Offers of Settlement resulting from enforcement and disciplinary actions for failure to deliver mutual fund breakpoint discounts are available to the public upon request. For convenience, NASD makes these documents available in electronic form.

 

Letters of Acceptance, Waiver and Consent

 

Last Updated: 2/17/2004