May 26, 2004 — Mutual fund companies will have to provide more disclosure about discounts on front-end sales fees, according to a new order from the Securities and Exchange Commission.
The SEC voted to adopt amendments that will, among other things, require a mutual fund to provide a brief description in its prospectus of arrangements that result in sales load “breakpoints,” including a summary of eligibility requirements, with more detailed information in the statement of additional information.
Some mutual funds with a front-end sales load provide discounts for larger investments, the SEC noted. The investment levels required to obtain a reduced sales load are referred to as “breakpoints.”
The SEC and the National Association of Securities Dealers recently announced enforcement and disciplinary actions against 15 brokerage firms for failure to deliver mutual fund breakpoint discounts during 2001 and 2002. The firms agreed to compensate customers for the overcharges and pay fines that total over $21.5 million.
Funds must provide the disclosure required by the amendments starting Sept. 1, 2004.
Contact Robert F. Keane with questions or comments at: