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WASHINGTON – Industry-wide reforms recommended for the accurate processing of breakpoint sales load discounts on mutual fund purchases were recently given the green light by the Securities and Exchange Commission. The Joint NASD/Industry Task Force on Breakpoints, comprised of officials from the SEC, the National Association of Securities Dealers, the Securities Industry Association and the Investment Company Institute, offered recommendations on improving disclosure regarding breakpoints, improvements in the processing of mutual fund purchase orders, and increased investor education on the opportunity to obtain breakpoints. Typically, breakpoint discounts are applied to front-end load funds to reduce sales loads at investment levels of $50,000, $100,000, $250,000, $500,000 and $1 million. Breakpoint discounts can apply to single large purchase or to purchases made over a specified period of time. Investors are often allowed to aggregate shares owned across a family of funds, and to aggregate fund shares owned by family members or other related persons, to reach investment levels at which breakpoint discounts are applied. Industry figures show that less than 7% of all mutual fund sales in 2002 were of front-end load funds. The task force report follows a joint examination sweep of 43 broker-dealers conducted from November 2002 through January 2003 by the SEC, NASD and NYSE. Staff examiners found that nearly one in three transactions in front-end load mutual funds that appeared eligible for a breakpoint discount did not receive one. The examination sweep found that most breakpoint problems did not appear to be intentional failures to apply sales load discounts. The most frequent causes were not linking a customer’s ownership of different funds in the same mutual fund family, and not linking a customer’s purchase of fund shares with shares owned by related persons, such as family members. SEC Chairman William Donaldson said he “fully expects that the industry will continue to work to implement (the) recommendations.” “Mutual fund investors are saving for education, retirement, and other long-term goals,” Davidson said. “To meet those goals, they must maximize the returns on their investments (and) it is essential that they receive the correct sales loads on their mutual fund transactions.” In January, the SEC asked the NASD, the Securities Industry Association and the Investment Company Institute, to convene a task force to address industry-wide failures to deliver breakpoint discounts. At the same time, both the SEC and NASD alerted investors to this issue and posted additional information to assist investors on their Web sites. Donaldson said he has asked the SEC to move ahead with additional investor protection initiatives concerning the costs and conflicts of interest in mutual fund investments. [email protected]

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