Definition of Breakpoint Schedule

A Breakpoint Schedule is used by mutual fund companies as a way to attract more capital. Breakpoint schedules offer mutual fund investors reduced sales charges for larger dollar investments. An investor may take advantage of the sales charge reductions by investing more money into the mutual fund at any one time, or may sign a letter of intent to reach a breakpoint sales charge reduction over a 13 month window.

Applying "Breakpoint Schedule" to Securities Exams:

Breakpoints are quantity discounts offered by mutual fund companies. The more shares a customer purchases in the same fund, or family of funds, the lower his / her sales charges will be. As an incentive for investors to invest larger sums of money into a mutual fund, the mutual fund will reduce the sales charge based on the dollar amount of the purchase. Breakpoint sales charge reductions are available to any “person,” including corporations, trusts, couples, and accounts for minors. Breakpoint sales charge reductions are not available to investment clubs or to parents and their adult children investing in separate accounts. The following is an example of a breakpoint schedule that a family of funds might use

Dollars Invested Sales Charge
$1-24,999 8.5%
$25,000-$74,999 7%
$50,000- $149,999 5%
$150,000-$499,999 3%
$500,000 or more 1.5%

If a mutual fund charges the maximum allowable sales charge of 8.5% it must offer a breakpoint schedule to investors who invest in the fund. In addition the mutual fund company must offer rights or accumulation and reinvestment of capital gains and dividends at the NAV. Most FINRA exams are going to your mastery of the requirements and operations of a breakpoint schedule in addition to other mutual fund features. Make sure you are ready to pass your exam with our Greenlight money back pass Guarantee.

Good Luck on your Exam !

The Securities Institute of America, Inc.

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