If a mutual fund has a breakpoint at $100,000, which scenario qualifies as a breakpoint sale?

A breakpoint sale occurs when an investor is encouraged or solicited to purchase an amount just below a breakpoint to avoid the higher fee associated with the next tier of investment. In this scenario, since the mutual fund has a breakpoint at $100,000, the key point is if the transaction is structured to intentionally fall below that threshold.

When an investor is solicited to make a purchase of $99,000, which is below the $100,000 breakpoint, it raises the concern that the salesperson may be trying to avoid the breakpoint that would lead to a lower fee structure. This scenario exemplifies the essence of a breakpoint sale, where the intention behind the advice or solicitation is to keep the investment just beneath the threshold.

On the other hand, purchases at or above the breakpoint, such as $100,500 or $101,000, do not constitute a breakpoint sale since they exceed the threshold necessary for lower fees. Similarly, a non-solicited purchase at exactly $100,000 doesn't fit the definition of a breakpoint sale, as there’s no direct solicitation encouraging the investor to limit the purchase. Thus, the scenario outlined reflects the practice of employing sales tactics around the breakpoint to avoid fees, leading to the conclusion that the purchase scenario at $99