SIE: 3.1.5. Prohibited Mutual Fund Practices

3.1.5.  Prohibited Mutual Fund Practices

Breakpoint sales. Because breakpoints can be confusing to investors, registered representatives who sell mutual funds should help their customers understand and take advantage of breakpoints. If an investor is a few dollars shy of a breakpoint, a 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 customer without informing the customer of the breakpoint, it is called a breakpoint sale. Breakpoint sales are prohibited by FINRA.

Late trading. Late trading is the practice of placing mutual fund orders after the fund has calculated its daily NAV. As noted earlier, investors who buy and sell shares of mutual funds receive the forward price, which is the NAV that is calculated at the end of the trading day. Typically, the NAV is calculated when markets close at 4:00 p.m. ET. If an order to buy or sell comes in after the NAV has been calculated, the investor should receive the