The National Association of Securities Dealers (NASD) has issued a warning to its members to be more diligent about granting breakpoints to mutual fund customers. Such breakpoints, set by mutual fund companies to reduce front-end sales loads by several basis points up to several percentage points, generally occur at the $50,000, $100,000, $250,000 and other high marks, sometimes even reducing front-end fees to zero on share purchases of $1 million or more. Without naming specific brokers, NASD charges that many of them intentionally bill more than they should, and says this is "particularly [egregious] for mutual fund transactions involving letters of intent and rights of accumulation."

NASD also notes that with the advent of automated processing and settlement systems, it is "essential" for brokers to program such systems to automatically recognize breakpoints.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.