The Securities and Exchange Commission and National Association of Securities Dealers have announced a series of actions resulting from their examination of mutual fund breakpoints. The regulators directed securities firms to assess their treatment of breakpoints in the sale of mutual fund A shares.
The average overcharge was $243, but ranged up to $10,000. One out of five transactions that warranted a breakpoint did not receive it, and regulators estimate that investors are due at least $81 million from 2001 and 2002 alone. Securities firms are obliged to repay clients the fees, including interest, by August of this year.
"While NASD has already told firms to make refunds of identified overcharges, we are now directing firms to specifically notify their customers, alerting them to this problem so that the appropriate refund can be made promptly," said Mary Schapiro, vice chairman and president of regulatory oversight at the NASD.
In an industry rife with scandal, the breakpoint overcharges represent one area where the SEC can take an active role in protecting investors. "Broker/dealers who process fund transactions on behalf of investors simply must do so in a way that ensures that all available discounts are given to the investor. The actions we announce today are another step we are taking to ensure that fund investors are protected in our markets," said SEC Chairman William Donaldson.