FINRA Issues Mutual Fund Breakpoint Alert

FINRA

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.

FINRA describes three ways investors can qualify for breakpoint discounts: if the dollar size of a single mutual fund purchase exceeds one or more breakpoints; if the customer writes a letter of intent stating their intention “to invest an amount over a breakpoint level within a given period of time specified by the fund”; and if the investor has “rights of accumulation” that grant a discount if they combine current purchases with previous purchases in the same fund, purchases of other funds in the same family, purchases of same-family funds in different accounts, and.or purchases of same-family funds by related parties. Investors can generally find information about their eligibility for breakpoint discounts in a fund’s prospectus, the fund issuer’s website, or by asking their broker.

FINRA notes that many firms have already commenced processing refunds to entitled customers, as FINRA has directed hundreds of firms to notify certain customers that they may be eligible. Your firm is required to check its records to determine your eligibility, and to make refunds to eligible customers “regardless of the performance of the mutual fund” the customer purchased. Firms who fail to offer breakpoint discounts or refunds to eligible customers may be subject to disciplinary action by FINRA or the Securities and Exchange Commission.

If you or someone you know has not received a breakpoint discount to which they are entitled, call Fitapelli Kurta at 877-238-4175 for a free consultation. You may be eligible to recover losses. Fitapelli Kurta accepts all cases on a contingency basis: we only get paid if and when you collect money. Time to file your claim may be limited, so we encourage you to avoid delay. Call 877-238-4175 now to speak to an attorney for free.