SEC and NASD Action Plan on Mutual Fund Sales Load Charges


Washington, D.C., January 16, 2003 -- Continuing their joint efforts to ensure that investors are charged the correct sales loads on their mutual fund transactions, the Securities and Exchange Commission and NASD have launched a multifaceted action plan.

The SEC and NASD are seeking reports from all NASD member firms on the adequacy of their policies and procedures to ensure that larger mutual fund investors receive promised sales load charge reductions. Additionally, NASD is surveying all of its members to obtain data on their mutual fund sales. These actions follow up on the SEC staff's alert to all brokerage firms and NASD's Notice to Members, issued on Dec. 23, 2002, urging firms to conduct an immediate review of the adequacy of their existing sales load policies and procedures.

Currently, the SEC and NASD, along with the New York Stock Exchange, are conducting examinations of selected firms that sell front-end load mutual funds. The examinations are designed to determine whether mutual fund purchasers are receiving promised sales load reductions for making larger investments. The investment levels required to obtain a reduced sales load are commonly referred to as "breakpoints."

The SEC and NASD expect to issue a joint statement of the examination results and firm responses in early February.

In addition, SEC Chairman Harvey L. Pitt, in a Jan. 15 letter, asked NASD, the Securities Industry Association, and the Investment Company Institute to convene a working committee under NASD's aegis to explore and recommend ways in which the mutual fund and brokerage industries can prevent abuses and eliminate errors in the calculation of sales loads, make operational changes to ensure the accuracy of and assist brokers in calculating sales loads, improve investor education on sales loads, and simplify or enhance disclosure of sales discounts.

"This is an issue that demands swift action by regulators, as well as the focused attention of the mutual fund and brokerage industries, others knowledgeable about the issue, and consumer advocates, to protect the investing public," Pitt said.

Both the SEC and NASD have alerted investors to this issue and placed additional information on their Web sites. Investors can learn more about reduced sales loads by going to,, and

Chairman Pitt's letter to NASD, SIA and ICI is available at The SEC letter to NASD members is available at The NASD Notice to members is available at


Last modified: 10/22/2003