Reflects the maximum initial sales charges
in the first year.
For a load fund, a sales charge
or "load," such as 6% of the amount invested, would be deducted directly at the time of sale and used to compensate the sales representative and the selling organization.
A deferred sales charge
is generally five to six percent over a varying number of years.
If "B" shares are purchased, there is no initial sales charge
; however, the investor agrees to pay a back-load charge of possibly 5% of the original investment or market value at the time of redemption.
The regulatory agencies have also attempted to give potential investors a clearer idea of what their charges will be by requiring a table that hypothetically estimates the dollar cost of all charges for all classes, including sales charges
and fund expenses, with (and sometimes without) redemption, for a $1,000 investment earning a five percent hypothetical annual return over different time periods.
Front-end sales charge
: This fee is charged when mutual fund shares are purchased.
The proposal encourages funds to continue their practice of giving investors alternatives to paying sales charges
. Some of these include paying charges at the time of purchase, redemption or paying a continuing fee.
These rights use breakpoints to reduce sales charges
. Rights of accumulation differ from a "letter of intent" (see page 179) in that they do not require any stated amount to be invested over any particular period of time, and such rights only apply to cumulative purchases above the break points.
Unitholders will not be required to pay any redemption fees, sales charges
or other fees associated with the termination, it added.
"The ongoing sales charges
would be capped at a certain point, which would differ from fund to fund," but the caps would be either the lower of the fully loaded A share mutual fund or 6.25% under the FINRA rule, Bellaire explains.
The SEC's proposal would: limit fund sales charges
; improve transparency of fees; encourage retail price competition; and revise fund director oversight duties, according to the regulator.