A new report issued this afternoon by securities regulators shows that nearly one in three sales of front-end-load mutual funds between November 2002 and January 2003 did not receive the breakpoint sales charge it should have.

On average, that failure cost investors $364 in lost discounts per transaction, according to the regulators that released the study.

The report, jointly issued by the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange found that three brokerage firms failed to provide discounts on any sampled fund purchases whatsoever, and most firms failed to provide at least some discounts. Two unnamed firms provided all applicable discounts.

The breakpoint failures were apparently unintentional, the regulators found, and were more frequent with electronic orders rather than paper ones.
The most frequent failure occurred where brokers neglected to link customers’ holdings within a single mutual fund family.

As a result of the findings, 2,000 broker/dealers are being told to review samples of their mutual fund sales transactions and report the results to the NASD.



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.