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NASD Takes Steps to Educate Brokers on Breakpoint Discounts
Washington, DC, January 10, 2005 – The National Association of Securities Dealers (NASD) has released a webcast aiming to help brokers understand the differences between share classes, determine which share class offers the best investment for their customers, and recognize when a customer qualifies for a breakpoint discount.
Many mutual funds that are sold with sales charges (or "loads") offer discounts to investors who invest certain amounts of money. These discounts are available only among funds that are sold with sales charges and do not apply to "no load" funds, which are sold without sales charges. The amount of the discount varies, depending upon the amount of the investment. The investment amounts at which investors qualify for the discounts are called breakpoints. The higher the level of your investment, the more likely you are to qualify for a breakpoint discount.
A Joint NASD/Industry Task Force on Breakpoints issued a report that sets forth 13 recommendations to address potential errors and failures in providing breakpoint discounts to investors. The report calls for voluntary implementation of the recommendations, and encourages the SEC and self-regulatory organizations to monitor implementation efforts.
The Institute, a member of the Joint NASD/Industry Task Force on Breakpoints, strongly supported efforts to ensure that the nation's mutual fund shareholders receive the appropriate discounts on eligible purchases through intermediaries of mutual fund shares with front-end sales loads. The Institute also offers a free online guide to help investors ensure that they receive the proper breakpoints when they purchase mutual funds.