The Securities and Exchange Commission and NASD have announced a series of actions in connection with U.S. brokers overcharging their customers on their mutual fund purchases.

The NASD is directing almost 450 securities firms to notify customers who purchased Class A mutual fund shares since Jan. 1, 1999, that they may be due refunds as a result of the firms’ failure to provide breakpoint discounts. Breakpoint discounts are volume discounts applied to the front-end load funds. The extent of the discount depends upon the amount the customer invested in a particular mutual fund family.

The NASD is also directing almost 175 of those firms with poor records of providing breakpoint discounts to complete a comprehensive review of transactions since the beginning of 2001 for possible missed discount opportunities, and a number of those firms may be the subject of enforcement actions by NASD and the SEC.

These actions follow examinations that revealed that many investors were not receiving correct breakpoint discounts. The exam findings were outlined in the Joint Report of Examinations of Broker-Dealers Regarding Discounts on Front-End Sales Charges on Mutual Funds

The report found that most firms did not uniformly deliver appropriate breakpoint discounts to customers. Overall, discounts were not delivered in about one of five eligible transactions. NASD estimates that at least US$86 million is owed to investors for 2001 and 2002 alone.