Breakpoint Sale

Definition - What does Breakpoint Sale mean?

Breakpoint Sale is the practice of selling mutual fund shares in dollar amounts that are just below the point where an investor would be entitled to a sale charge reduction. A breakpoint sale is designed for the purpose of trying to earn a larger commission. This is a violation of the Rules of Fair Practice and should never be done.

Testopedia explains Breakpoint Sale

Ex: A customer wishes to invest $25,000 in a mutual fund which offers a breakpoint of 7% once the customer has invested $20,000. Instead of making the breakpoint available to the investor, the rep suggests the customer make 2 separate investments back to back; one for $15,000 and one for $10,000. The customer will pay the full sales charge on each investment and the rep will make a larger commission than if the customer had invested the full $25,000 as one trade. Breakpoint selling is a prohibited practice as per FINRA rules.

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