Investment Company Products
Product lineup
Open-end funds issue redeemable shares continuously at NAV plus any sales charge; closed-end funds sell a fixed number of shares in an offering and then trade on an exchange; unit investment trusts hold a fixed, unmanaged portfolio for a stated term. Principal-level supervision centers on the sales charge mechanics: front-end loads with breakpoints, letters of intent, rights of accumulation, 12b-1 fees, and contingent deferred sales charges on Class B and C shares.
Pricing rules
Rule 22c-1 requires forward pricing: an order receives the next NAV computed after the order is received. Orders entered before the close (generally 4:00 p.m. ET) receive that day's price; later orders receive the next business day's. Rule 22(d) requires shares to be sold at the price stated in the prospectus - no special deals, no retroactive price adjustments outside the prospectus.
Traps
- Breakpoints apply to the dollar amount invested in a single fund, but purchases in accounts of the same immediate family often may be aggregated.
- A letter of intent is retroactive: reaching the target within 13 months lowers the load back to the first purchase date; failing to complete it lets the fund redeem shares to cover the shortfall.
- A CDSC is not a front-end load and cannot simply be waived - check the prospectus for free-withdrawal provisions.
- Telling a client a 4:15 p.m. order will get today's price is a forward-pricing violation.
Worked example. A client invests $48,000 and signs a letter of intent for $50,000, which sits at a 4.5% breakpoint rather than a 5.75% load. Eleven months later she adds the remaining $2,000. The reduced load applies retroactively and the fund returns the difference. Had she never completed the LOI, the fund could redeem enough shares to collect the higher load.