Breakpoint Sale

Breakpoint Sale

For mutual funds, this refers to the practice of soliciting mutual fund purchases just below the breakpoint (to earn more commissions). The practice is considered unethical and in violation of NASD rules.

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Breakpoint Sale

In loaded mutual funds, the sale of shares to an investor that qualifies the investor for a reduced load or sales fee. For example, if the breakpoint for a certain mutual fund is $50,000 and investments beyond that amount will halve the load, it becomes advantageous for an investor to invest $50,000, instead of, say, $45,000, because this will entitle him/her to half the load for the entire investment, and not just for the amount invested past $50,000. Mutual funds that allow investors to buy at just below the breakpoint may violate Financial Industry Regulatory Authority regulations. An investment need not come all at once to pass the breakpoint; an investor putting two tranches of $25,000 into the above mutual fund will usually find his excess load refunded. See also: Right of accumulation.