mutual fund sponsor
- is the investment company
- start fund
- gather first $
- register with SEC
mutual fund underwriter
- distributor of mutual fund shares
selling agreement
- when broker/dealers buy shares at net asset value (NAV) and sell them to customers, they must sign a selling agreement
Securities Act of 1933
- can't buy new issues on margin
- after individuals buy shares and hold for 30 days, shares can be used as collateral in margin accpunt to buy more shares
What is the maximum sales charge that can be assessed on a purchase of open-end investment company shares with all options allowed?
max sales charge allowed
- if a)quantity discounts
- if rights of accumulation
Public offering price
A mutual fund has a NAV of $18.60 and a sales charge of 6%. What is the offering price of the fund?
- 100%-6%=94%.
- 18.6/.94=19.79. POP=19.79
quantity discounts
- customer can buy mutual fund shares with less sales charges
- allowed when customer buys a large amount of shares
- prospectus describes discounts for buying large # of shares
- NO: investment clubs
- YES: husbands, wives and minor children
- salesperson must tell customers about discounts
- break FINRA rule, salesman doesn't tell customer about sales discounts
Sales breakpoint (SB, good for customer)
- point where customer gets cheaper sales charge
breakpoint sale (BS, bad for customer)
- salesperson doesn't tell customer who buys large amount of shares that they will get a discount if they buy a smaller amount of new shares above what they were planning on buying
- letter of intent, helps avoid breakpoint sale
- customer statement, helps avoid breakpoint sale
- can happen if salesperson suggests two different mutual funds when customer would pay less sales charges if they bought only one mutual fund
All of the following types of customers can take advantage of reduced sales charges, such as a breakpoint in class A shares, except:
- a father and his adult son
- separate adults are not a legal group like husband and weife
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