Investors who purchase mutual funds (other than no-load funds) incur sales charges that are assessed either upon initial purchase (front-end) or upon redemption of shares (back-end). Mutual funds generally offer investors discounts to sales charges based on invested assets, known as “breakpoints”. Registered Representatives (“RRs”) are responsible for understanding the availability of sales charge discounts, including breakpoint, to provide the customer the opportunity to purchase a mutual fund under the most favorable terms available.
When selling front-end load mutual funds (i.e. A-shares), RRs are required to check for breakpoint by completing the Breakpoint Checklist and Worksheet (“Worksheet”).
WORKSHEET UPDATED
The Worksheet has been updated based on changes to the FINRA breakpoint worksheet template. The purpose of the worksheet is to document the customer’s holdings to determine whether they qualify for a reduced sales charge, including the total holdings of:
1. The customer at ESI,
2. The customer directly with the fund company or with another broker dealer, and
3. Related parties (some funds provide discounts when related persons own the same fund or funds in the same family of funds).
The Worksheet is required every time a solicited, front-end load mutual fund purchase is made.
• This is true for both new accounts and additional investments, whether in brokerage or directly-held mutual fund accounts.
• For accounts on periodic investment plans (regular and recurring payments), the Worksheet may be obtained for the first payment and periodically going forward.
The Worksheet is not required to be submitted with paperwork to ESI for suitability review. However, a copy of the Worksheet must be kept in the client file. If you use Docupace as your client file, the Worksheet must be kept in Docupace. A review for breakpoint worksheets is completed during branch examinations. Failure to obtain copies of the Worksheet in your client file may result in examination deficiencies or disciplinary action.
NOTE: When the Mutual Fund Purchase Disclosure (“MFPD”) form is completed, the client is attesting that you reviewed the Breakpoint Checklist and Worksheet with them.
QUESTIONS
Questions regarding this Field Notice may be directed to ESI Compliance at 800-344-7437 or ESICompliance@nationallife.com.
TC133581(0523)1