Breakpoints Written Disclosure Document

To assist the financial industry in fulfilling its obligation to provide all available breakpoint discounts on sales of front-end load mutual funds, the Joint NASD/Industry Task Force recommended that broker-dealers provide investors with a Written Disclosure Statement, explaining the availability of breakpoint discounts, at the time of purchase or on a periodic basis. See Report of the Joint NASD/Industry Task Force on Breakpoints, pp. 13, Recommendation I. To assist member firms in implementing this Task Force recommendation, NASD and an industry working group, led by Mike Stone, of Morgan Stanley, have developed a sample Written Disclosure Statement.

FINRA believes that use of this Disclosure Statement will aid members and associated persons in educating investors regarding the availability of breakpoint discounts, which will, in turn, facilitate the delivery of breakpoint discounts, and help investors and investment advisors make appropriate choices among the various share classes available to investors. FINRA has provided this Written Disclosure Statement as an example of what FINRA believes is appropriate. Thus, members may wish to tailor this Disclosure Statement to reflect the rules of the mutual funds that they sell.

Although FINRA believes that use of this Written Disclosure Statement will facilitate the full and accurate delivery of breakpoint discounts, members are reminded that registered representatives must understand the terms upon which mutual funds offer breakpoints, including the rules regarding rights of accumulation, letters of intent, and valuation, to ensure the delivery of breakpoint discounts. Thus, use of this Written Disclosure Statement does not diminish members' obligation to train and supervise registered representatives who sell mutual funds.

FINRA Compliance Tools Disclaimer

This optional tool is provided to assist member firms in fulfilling their regulatory obligations. This tool is provided as a starting point, and you must tailor this tool to reflect the size and needs of your firm. Using this tool does not guarantee compliance with or create any safe harbor with respect to FINRA rules, the federal securities laws or state laws, or other applicable federal or state regulatory requirements. This tool does not create any new legal or regulatory obligations for firms or other entities.

Updates

This tool was last reviewed and updated, as needed, on February 7, 2024. This tool does not reflect any regulatory changes since that date. FINRA periodically reviews and updates these tools. FINRA reminds member firms to stay apprised of new or amended laws, rules and regulations, and update their WSPs and compliance programs on an ongoing basis.

Member firms seeking additional guidance on certain regulatory obligations should review the relevant FINRA Topic Pages, including the Breakpoints Topic Page.

Staff Contact(s)

FINRA's Office of General Counsel (OGC) staff provides broker-dealers, attorneys, registered representatives, investors and other interested parties with interpretative guidance relating to FINRA’s rules. Please see Interpreting the Rules for more information.

OGC Staff Contact
Joe Savage
1700 K Street, NW
Washington, DC 20006
(202) 728-8000