In response to concerns raised by Congress and securities regulators, the U.S. Securities Industry Association is spearheading efforts to ensure that clients are charged the correct sales loads for mutual fund purchases.

“We have already begun assembling a team to address concerns about mutual
fund breakpoints,” said SIA Senior Vice President and General Counsel Stuart
Kaswell. Breakpoints are reductions given in certain mutual fund sales when a client invests a certain amount of money with the fund group; the larger the investment, typically, the greater the fee discount.

In addition, SIA has been working with broker-dealers, mutual fund companies, and other parties involved with fund transaction processing to develop a better understanding of the issues that need to be addressed regarding breakpoints. The major mutual fund families, brokerage firms, the Investment Company Institute, and the National Securities Clearing
Corporation will participate in a meeting arranged by SIA to identify and resolve any concerns.

The concerns are primarily the result of the significant operational and systems challenges faced by both broker-dealers and fund families in their efforts to capture and track all of the transactions that should be considered in determining whether an investor is entitled to reduced sales charges, says Kaswell. These include: the wide array of
breakpoint policies across the thousands of mutual funds; the many choices investors have for purchasing funds; the different ways in which investors’ holdings may be reflected on fund and broker records; and, the manner in which information on fund transactions is transmitted between brokers, funds, and intermediaries.

“SIA intends to work with the relevant financial industry organizations to be sure that we have appropriately addressed all of these concerns,” says Kaswell. “We also plan to work closely with our regulators and to keep Congress apprised of our progress.”