If you plan on sitting for the Series 6 exam, you should expect questions on when a person may obtain a reduced sales charge or quantity discount on the purchase of mutual fund shares.
Normally when a person invests an amount of money equaling or exceeding a breakpoint, he qualifies for a reduced sales charge on the entire purchase. As an example, if XYZ Fund has its first breakpoint at $25,000, at which point the sales charge drops from 5.75 percent to 4.00 percent, a person who invests $30,000 in one lump sum will pay a sales charge of $1,200.
The SEC has found that many broker/dealers fail to give a customer a reduced sales charge when due. This is because the brokerage firm does not check to see if the customer owns shares in related funds which are part of the same family. Furthermore, some representatives are not aware that family members of the customer may own shares that should be aggregated with the new purchase when considering whether the customer has reached a new breakpoint.
PS Watch for Bob Eder's forthcoming book, Study for the Series 6 Exam.
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