Breakpoint discounts are volume discounts on the pre-end sales charge that is charged to investors who purchase Class A investment fund shares. The amount of the rebate depends on the amount invested in a certain family of funds. FINRA Rule 2342 prohibits the sale of investment fund units in amounts below one stop if sales are made «to participate in higher selling costs.» If you invest in an investment fund that distributes dividends but wants to limit your tax debt, you will find out when shareholders are eligible for dividends. All dividend distributions you receive will increase your taxable income for the year, so if dividend production is not your primary goal, do not buy shares in a fund that is about to give a dividend. However, not all investment funds are subject to payment fees. Instead of a traditional top-up fee, some funds charge a back-end top-up fee when you trade your shares before a certain number of years expire. This is sometimes called the Conditional Deferred Turnover Tax (CSD). Mutual funds are not traded freely on the open market, such as equities. B.es and ETFs. A company`s procedures should include training of staff involved in the sale of Class A shares in front-end investment funds. FINRA provides an overview of training that contains important stopping points that companies should address in their training. FINRA has also developed a checklist and worksheet that can help companies collect the information they need to ensure customers receive their breakpoint discounts.
FINRA also recommends that companies provide investors with a written statement of information explaining the availability of breakpoint discounts, either at the time of purchase or shortly thereafter. In a letter to NASD President and Chief Executive Officer Robert R. Glauber, on January 15, 2003, former Chairman of the Securities and Exchange Commission («SEC») Harvey L. Pitt, requested that NASD convene a task force with the Securities Industry Association («SIA») and the Investment Company Institute («ICI») to recommend industry-wide changes to grant errors and missed opportunities for calculating sales expenses that are calculated at the time of purchase. investment fund shares for a front-end sales charge. In addition, the rule prohibits companies from accepting cash compensation related to the distribution of investment funds, unless the compensation agreement is disclosed in the prospectus. Many funds require a minimum contribution, often between $1,000 and $10,000. Some are higher and not all funds set a minimum. Investing in investment funds is not difficult, but it is not quite the same as investing in exchange-traded funds (ETFs) or stocks. Because of their unique structure, some aspects of the investment fund trade may not be intuitive to the first investor.