Mutual Funds
An investor wants to invest $45,000 in a mutual fund. The fund has a breakpoint at $50,000 that reduces the sales charge from 5% to 4%. A representative who recommends investing only $45,000 to earn the higher commission has committed:
A breakpoint sale is a prohibited practice where a representative intentionally keeps an investment below a breakpoint to earn a higher commission. The representative should inform the customer about the breakpoint and t
Complete Analysis & Legal Rationale
A breakpoint sale is a prohibited practice where a representative intentionally keeps an investment below a breakpoint to earn a higher commission. The representative should inform the customer about the breakpoint and the benefit of investing slightly more to qualify for the lower sales charge.
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:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Regulatory framework for investment companies including mutual funds (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.