Series 24: 3.5.5.5. Purchasing And Redeeming Mutual Fund Shares

3.5.5.5. Purchasing and Redeeming Mutual Fund Shares

Several rules apply regarding how members can purchase and redeem mutual fund shares. When member firms sell shares of a mutual fund, they must secure a written agreement between the sponsor and the member firm. This agreement must stipulate the compensation to the member, which typically takes the form of a discount of the public offering price, often called a concession. The firm then sells the shares to the public at the public offering price. Firms may not sell the shares to investors or non-member broker-dealers at less than the public offering price (except in the case of a breakpoint discount disclosed in the prospectus).

Members’ compensation must be stated in the prospectus, and if the fund’s sponsor decides to give some member a different compensation than others, the name of t