SIE practice questionmediumMutual Funds — Breakpoints
A mutual fund has breakpoints at $25,000, $50,000, $100,000, and $250,000. An investor wants to invest $48,000. Their registered representative should:
- ARefuse to accept the investment until the client has at least $50,000
- BInform the investor that an additional $2,000 investment would qualify for a reduced sales charge at the $50,000 breakpoint✓ Correct answer
- CRecommend switching to a different fund family
- DAccept the $48,000 investment without comment
Explanation
Why B — Inform the investor that an additional $2,000 investment would qualify for a reduced sales charge at the $50,000 breakpoint
The representative should inform the investor about the nearby breakpoint. Selling shares just below a breakpoint without disclosure is called a 'breakpoint sale' and is a violation of FINRA rules. The rep must not refuse the order (C) but must make the client aware they are close to qualifying for reduced sales charges. This protects the investor's interests.
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