und regulators this afternoon said that shareholders paid the incorrect commission on roughly one-third of fund purchases in transactions they studied between November and January. The full report released by the Securities and Exchange Commission (SEC), NASD and the New York Stock Exchange (NYSE) is available on the SEC
Forty-three broker-dealers took part in the initial study of the issue. Because of the findings the regulators are calling on roughly 2,000 broker-dealers to review samples of their front-end load mutual fund purchase transactions and report the results to NASD. The SEC expects to provide broker-dealers a methodology for the examination shortly.
Shareholders were overcharged by an average of $364 in cases in which the regulators found shareholders to have been charged the incorrect commission for fund purchases.
The report stated that most breakpoint problems did not appear to be intentional failures to apply sales load discounts. It added that the causes of the failure to apply lower commissions were:
not linking a customer's ownership of different funds in the same mutual fund family to reach the breakpoint amount (44 percent)
not linking a customer's purchase of fund shares with shares owned by related persons, such as a spouse or minor children (21 percent)
It also found that firms relying on paper applications to process transactions did a better job of recognizing breakpoints that those processing orders electronically.
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