Mutual Fund Letter of Intent (LOI): 13-Month Window and 90-Day Backdating Rule
A customer wishes to invest $100,000 in a mutual fund over time to qualify for a breakpoint discount starting at $100,000. The customer deposits $30,000 today and executes a Letter of Intent (LOI). Under FINRA and SEC rules, what is the maximum duration of an LOI, and by how many days may an LOI be backdated?
A Letter of Intent (LOI) is valid for 13 months and may be backdated up to 90 calendar days to include prior purchases toward the breakpoint.
Complete Analysis & Legal Rationale
A Letter of Intent (LOI) allows a mutual fund investor to receive an immediate breakpoint discount by pledging to reach a specified investment target within 13 months. The LOI is non-binding on the customer (shares are held in escrow in case the target is missed). The investor can also backdate the LOI by up to 90 calendar days to count previous purchases toward the target (the 13-month period runs from the backdated date).
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
A Letter of Intent (LOI) is valid for 13 months and may be backdated up to 90 calendar days to include prior purchases toward the breakpoint.
Fails to adhere to packaged product rules for B.
Fails to adhere to packaged product rules for C.
Fails to adhere to packaged product rules for D.
Official Standard: A Letter of Intent (LOI) allows a mutual fund investor to receive an immediate breakpoint discount by pledging to reach a specified investment target