Breakpoint sales are prohibited when brokers attempt to earn higher commissions by selling shares just below the breakpoint.

• A. True
• B. False
• C. Not specified
• D. Only for load funds

Answer: (A)

Breakpoint discounts reward investors for larger purchases by lowering the upfront sales charge. Brokers are expected to inform clients about these discounts and, when appropriate, help them reach the breakpoint so the investor pays less in charges. Deliberately selling just under the breakpoint to keep a higher commission for the broker is an improper sales practice and is prohibited. This rule applies to any mutual fund with a breakpoint, not just funds that carry a front-end load. The essence is that the broker's incentive should align with the investor’s best interests, not with maximizing commissions.