Prohibited Mutual Fund Practices
Breakpoint sales. Because breakpoints can be confusing to investors, registered representatives should help their clients understand and take advantage of breakpoints. If the investor is a few dollars shy of a breakpoint, the representative should advise the investor of this, even if it means the commission is reduced. When a rep fails to do this and sells a mutual fund to a client in an amount just under the breakpoint, the result is a breakpoint sale. Breakpoint sales are prohibited by FINRA.
Selling dividends. FINRA prohibits the practice of selling dividends. Selling dividends is when a registered representative encourages a customer to buy shares of a mutual fund right before the mutual fund pays a dividend. This practice is prohibited, because on the ex-dividend date, the net asset value of the mutual fund is adjusted downward to reflect the dividend, so the customer would receive no net benefit from buying the shares right