February 19, 2004
Mr. Jonathan G. Katz
Re: Disclosure of Breakpoint Discounts by Mutual Funds
Dear Mr. Katz:
The Financial Services Roundtable (the "Roundtable") represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer. Roundtable member companies provide fuel for America's economic engine accounting directly for $18.3 trillion in managed assets, $678 billion in revenue, and 2.1 million jobs. The Roundtable 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.
Breakpoint discounts are the volume discounts to the front-end load charged to investors who purchase Class A mutual fund shares, and the extent of the discount is dependent upon the amount that the investor has invested in a particular mutual fund family. After discovering problems with breakpoints during NASD examinations, the SEC requested that the NASD create and lead a task force to recommend industry-wide changes that address errors and missed opportunities to provide discounts to investors.
The Joint NASD/Industry Task Force on Breakpoints ("Task Force") is a twenty four member task force that includes representatives from the New York Stock Exchange ("NYSE"), securities firms, mutual fund companies, the Securities Industry Association ("SIA") and the Investment Company Institute ("ICI"). In July 2003, the Task Force issued a report recommending that; (1) mutual fund companies take steps to make investors aware of the availability of breakpoint discounts; (2) broker-dealers adopt policies and practices to gather the appropriate information from investors so that they can take advantage of all available breakpoint discounts; (3) transfer agents and broker-dealers modify the systems used to execute mutual fund transactions; and (4) regulators, such as NASD, NYSE and the SEC, and the mutual fund and securities industries continue to take active measures to educate the investing public about breakpoint opportunities.
The Roundtable applauds the Task Force for developing operational enhancements, disclosure requirements and regulatory changes in the area of mutual fund breakpoint discounts. We also appreciate the SEC's commitment to implement the Task Force's recommendations.
The member companies of the Roundtable strongly support the recommendations made by the Task Force. We believe the SEC's proposal is consistent with the Task Force's suggestions and that it would improve the flow and content of information by funds and broker-dealers to investors regarding breakpoint opportunities. When finalized, this proposal would establish a process to ensure that firms meet their responsibility to deliver breakpoint discounts to the investor.
If you have any further questions or comments on this matter, please do not hesitate to contact me or John Beccia at (202) 289-4322.
Richard M. Whiting