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.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Companies & Packaged Products questions
- Rights of accumulation (ROA) allow a mutual fund investor to:
- An investor making a large lump-sum investment in a mutual fund would MOST likely benefit from purchasing:
- 12b-1 fees are charges that a mutual fund uses to cover:
- A mutual fund has total assets of $500 million, total liabilities of $20 million, and 20 million shares outstanding.…
- Which of the following is a characteristic of a Unit Investment Trust (UIT)?
- How does an open-end mutual fund differ from a closed-end fund?
- The separate account of a variable annuity is:
- Which of the following investment products is regulated under the Investment Company Act of 1940?