FINRA has issued an investor alert informing investors that they may be eligible to receive partial refunds of the front-end sales charges paid on Class A mutual fund shares. According to FINRA, an “industry-wide survey” found that investors failed to receive discounts in roughly “one out of every five” eligible transactions.
While front-end sales load discounts are typically offered for bigger mutual fund investments, often beginning at $50,000, they occasionally beginning at investments “as low as $25,000,” according to the alert. FINRA requires securities firms to give refunds to customers who did not receive discounts they were entitled to receive. To determine whether you might be entitled, FINRA recommends asking the following questions: did you purchase a mutual fund with a front-end sales load? Did you purchase more funds in the same mutual fund family? Did any of your family members buy shares in this mutual fund or family of mutual funds? Does the total of all of these purchases exceed $25,000?
As FINRA’s alert explains, mutual fund breakpoint discounts are discounts that decrease the front-end sales charge on many mutual fund Class A shares. Those sales charges, or “loads,” typically vary by the amount invested. FINRA offers the example of a 5.75% front-end load at a cost of $1,000: “you’ll pay a sales load of $57.50, with the remaining $942.50 invested in the mutual fund.” Breakpoints are discounts on that load, and they increase with the size of the investment.