Securities Industry Association
February 13, 2004
Jonathan G. Katz
Re: Disclosure of Breakpoint Discounts By Mutual Funds
Dear Mr. Katz:
The Securities Industry Association ("SIA")1 appreciates the opportunity to comment on the above referenced proposal which would provide for enhanced prospectus disclosure regarding breakpoint discounts on front-end sales loads, including, among other things, how fund transactions are valued for purposes of determining breakpoint eligibility, and whether information regarding breakpoints is available on a fund's website.
As noted in the proposing release, examination sweeps by the NASD, NYSE and the Commission in late 2002 and early 2003 revealed a significant number of instances in which investors did not receive sales breakpoints to which they were entitled2. In February 2003, the NASD formed the Joint NASD/Industry Task Force on Breakpoints, together with SIA and the Investment Company Institute, to recommend ways in which the fund and brokerage industries can assure that investors properly receive such breakpoints. The recommendation contained in the Task Force report issued in July, 2003 included measures designed to improve the flow and content of information by both funds and broker-dealers to investors regarding breakpoint opportunities. The instant proposal is designed to implement such recommendations at the fund level, and SIA is pleased to support it, and to express its appreciation to the Commission for all of the support it has given to the Task Force's efforts to address breakpoint issues.
SIA believes that this proposal meets the goal of presenting breakpoint information in a manner which will be easily understood by investors, and that is consistent with Task Force recommendations. We would also note that other Task Force recommendations call for the disclosure of additional breakpoint information at the broker-dealer level. Collectively these combined disclosures, coupled with other Task Force recommendations, enhance investors ability to be aware of potential breakpoint opportunities, whether they meet qualification thresholds, and, if so, whether they have, in fact, received the breakpoints to which they are entitled.
Also, we share the Commission's view that prospectus disclosure regarding breakpoints should be brief, so as to not overwhelm investors, particularly since prospectus disclosure is one of only several methodologies being implemented to alert investors to breakpoint opportunities.3
Based on the foregoing, SIA supports the proposed disclosure regarding prospectus and website disclosure of breakpoint information, and applauds the expeditious manner in which the Commission has acted to help implement one of the key Task Force recommendations.
Any questions regarding this letter may be directed to the undersigned at (212) 618-0509.