Common Definitions Mutual Funds Should Use to Describe Breakpoint Discount Rules

The Joint NASD/Industry Task Force recognized that one of the challenges in delivering breakpoint discounts was the lack of "common definitions" of terms frequently used to define breakpoint opportunities, and charged an industry working group (consisting of ICI and SIA members, and NSCC) with the task of creating such common definitional standards. See Report of the Joint NASD/Industry Task Force on Breakpoints , pp. 8, Recommendation A.

 

The working group has now completed its task, and the Task Force urges mutual funds to include these definitions in their prospectuses and other relevant materials as soon as is reasonably practicable.

 

Common Definitional Standards

 

Section 1: Recommended Terms

Term Definition Additional Comments
Spouse The person to whom one is legally married. Preferred term (rather than using husband and wife)
Civil Union Two individuals of the same sex that have been joined in a legal contract similar to marriage.  
Domestic Partner A person with whom one shares a primary residence for at least six months, is in a relationship as a couple where one or each of them provides personal or financial welfare of the other without a fee, is not related by blood and is not married.  
Common Law Marriage A marriage between a man and a woman because the man and woman live together and hold themselves out to be married, even though they have not been married in a ceremony recognized by law. There are 14 states and the District of Columbia that recognize Common Law Marriage.

States that recognize common law marriage are:

  • Alabama
  • Colorado
  • Georgia (if created before 1/97)
  • Idaho (if created before 1/96)
  • Iowa
  • Kansas
  • Montana
  • New Hampshire (for inheritance purposes only)
  • Ohio (if created before 10/91)
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Texas
  • Utah
 
Parent The biological or adoptive mother or father of a child. Preferred Term (rather than mother and father)
Stepparent The spouse of a child’s biological or adoptive parent who is not the child’s biological or adoptive parent.  
Legal Guardian A person legally placed in charge of the affairs of a minor or an incompetent person.  
Child A biological or adopted son or daughter; a stepchild; a legal ward; or a child of a person standing in loco parentis. Preferred Term (rather than son or daughter)
Minor Child A child under the age of 21, regardless of the age of majority recognized by the law of the state in which the child resides.  
Stepchild The child of one’s spouse that is not your biological, adopted or foster child.  
Sibling A sibling is a brother, sister, stepbrother, stepsister, or adopted brother or sister. Preferred Term (Rather than brother, sister, stepbrother, stepsister, adopted brother or adopted sister)
Grandchild A child of one’s child.  
Grandparent A parent of one’s parent.  
Father-in-Law The father of one’s spouse.  
Mother-in-Law The mother of one’s spouse.  
Brother-in-Law The brother of one’s spouse;
the husband of one’s sister;
the husband of the sister of one’s spouse.
 
Sister-in-Law The sister of one’s spouse;
the wife of one’s brother;
the wife of the brother of one’s spouse.
 

 

Section 2: Discommended Terms

Term Definition Additional Comments
Family Unit A group of individuals who are household or family members. Recommend this term not be used because it is too ambiguous.
Household Member or Family Member Any person (a) sharing a residence who is related by birth, marriage, or adoption, or (b) who has been lawfully claimed as a dependent on the most recent federal income tax return of another member of the household. Recommend this term not be used because it is too ambiguous.
Immediate Family Members Spouse and minor children. Recommend this term not be used because it is too ambiguous.
Husband The man to whom one is married, including religious, civil and common law. Preferred term is spouse.
Wife The woman to whom one is married, including religious, civil and common law. Preferred term is spouse.
Father The male parent. This individual may be designated by birth, adoption or by legal guardianship. Preferred term is parent.
Mother The female parent. This individual may be designated by birth, adoption or by legal guardianship. Preferred term is parent.
Son Male who is a biological, adopted or foster child; a stepchild; a legal ward; or a child of a person standing in loco parentis. Preferred term is child.
Daughter Female who is a biological, adopted or foster child; a stepchild; a legal ward; or a child of a person standing in loco parentis. Preferred term is child.
Brother A male having the same parents as another or one parent in common with another. Preferred term is sibling.
Stepbrother A male who is related by virtue of a parent’s marriage to an individual with children by a former marriage or relationship. Preferred term is sibling.
Sister A female having the same parents as another or one parent in common with another. Preferred term is sibling.
Stepsister A female who is related by virtue of a parent’s marriage to an individual with children by a former marriage or relationship. Preferred term is sibling.
In-Law The mother and father of one’s spouse. It does not include a brother or sister–in–law. Recommend this term not be used, and instead list the specific in-laws that are allowed.
Family Owned Business The client’s sole proprietorship business. Recommend this term not be used, and instead list the specific type of businesses that are allowed.
Family Trust
Grantors, beneficiaries, trustees/fiduciaries
A trust created by or contributed to by an individual grantor(s), or maintained by and individual trustee(s), for the benefit of an individual beneficiary(ies) who is a:
  • Parent
  • Child
  • Grandchild
  • Sibling, or
  • Spouse
Of the grantor or trustee.
Recommend this term not be used, and instead list the specific type of party (trustee, beneficiary, etc.) that is allowed. Identifying general parties may not be enough. For example there may be specific types of beneficiaries such as “income only.”
Last Updated: 9/13/2004