NASD Sets Guidelines On Giving Money Back

The Joint NASD/industry task force released its study on breakpoints last month, confirming that millions are owed to clients by firms for not applying discounts on breakpoints. The NASD is now making sure the firms know exactly how to rectify the situation. In a Notice to Members released Monday, the NASD spells out exactly what member firms that weren’t providing the discounts—which the task force

The Joint NASD/industry task force released its study on breakpoints last month, confirming that millions are owed to clients by firms for not applying discounts on breakpoints. The NASD is now making sure the firms know exactly how to rectify the situation.

In a Notice to Members released Monday, the NASD spells out exactly what member firms that weren’t providing the discounts—which the task force found was just about all of them—need to do to provide refunds to effected clients. Breakpoints are sales charge discounts that mutual fund companies provide investors who put in a certain amount in a selected fund. In January, the NASD sent word to several firms that it had discovered brokers are not providing earned discounts to mutual fund investors, thereby overcharging them. The NASD charges that various brokers at undisclosed firms were ignoring breakpoints and charging clients the customary loads.

This new notice lets those guilty members know exactly what they’re expected to do. Discounts, the notice says, should start being handed out immediately. Firms should make sure that the refunds are made in cash, or as cash deposits into clients’ accounts; that the refund amounts are not correlated with the actual performance of the mutual fund, and most notably, that refunds are made for the amount the client was overcharged, plus 2.5 percent interest.

Two firms reached by Registered Rep. have confirmed they have seen the noticed and were already adhering to the guidelines.

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