contingent deferred sales charge

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Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Contingent Deferred Sales Charge

The formal name for the load in a back-end load fund. A CDSC is the fee paid when a shareholder sells shares in a mutual fund within a certain number of years. That is, when an investor initially buys a share in a back-end load fund, he/she agrees to pay a third party, usually a financial institution or broker, a certain percentage of the share's value if he/she decides to sell it within five to 10 years, depending on the specific nature of the agreement. The CDSC usually declines by the year until the maximum number of years is reached. See also: B-share.

contingent deferred sales charge

A mutual fund redemption fee that is reduced or eliminated for specified holding periods. For example, a fund might charge a 6% redemption fee for a holding period of less than one year, a 5% fee for a holding period of one to two years, and so forth. Mutual funds with a contingent deferred sales charge also generally levy an annual 12b-1 fee.
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Mutual funds do not provide a similar waiver when contingent deferred sales charges still apply to a mutual fund account whose owner needs to sell some shares to fund the costs of such a stay.
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The next most common are Deferred Sales Charges, or Back End Load, which is when the fee is enacted when the shareholder sells the fund shares.
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Without a full explanation of higher annual fees, contingent deferred sales charges and "breakpoints" for quantity discounts, a customer might naturally assume that no front-end cost is the way to go.
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Spurring adoption of Rule 12b-1 plans during its early years was a development not anticipated by either the SEC or the industry (110) when the rule was adopted: use of 12b-1 fees in connection with fund classes featuring so-called "contingent deferred sales charges," often called "CDSCs" or "CDSLs," (111) used to market load funds.
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The cost involved with this strategy includes the typical expenses associated with variable annuities, such as mortality and expense risk charges, administrative charges, rider fees, and deferred sales charges.
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The product carries no charges at the time of purchase, no surrender fees, no contingent deferred sales charges and no annual contract administrative charge.
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In contrast to traditional back-end sales loads, contingent deferred sales charges usually apply only for the first few years that you own a fund; then they disappear.
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Also investors were sold Class "B" mutual fund shares that carry deferred sales charges (loads) and higher internal expenses than Class "A" shares.
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The asset-based fee reductions are available to service programs without contingent deferred sales charges.
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Variable annuity contracts characterized by deferred sales charges, which typically range from 5 percent to 7 percent in the first year, and subsequently decline to zero after five to seven years.
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