With the heightened scrutiny following a joint report by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE), firms are under tremendous pressure to ensure that breakpoints are given to clients who are eligible. The biggest challenge facing the broker/dealer community is finding an automated solution that is capable of linking all the client information they currently manage.

"We are beginning to see a great demand from our clients to assist them in managing what has become a very large exposure area," said Al Hutwagner, Managing Partner of XcitekConsultingServices. "The need to automate is great, but the short-term solution is to be compliant and a large percentage of firms are not."

According to the Joint SEC/NASD/NYSE Report of Examinations of Broker-Dealers Regarding Discounts on Front-End Sales Charges on Mutual Funds, over 32% of the transactions reviewed did not receive a breakpoint discount or appeared to have incurred unnecessary sales charge. Some of the problems that can lead to the omission of discounts for eligible accounts include failure to link the client’s ownership of different funds within the same mutual-fund family, or failure to link shares owned in the same fund or fund family by the client’s relatives.

"What we offer is the ability to bring in specialists that know the mutual fund industry and can work independently from the people who are running the existing day-to-day operations. They have the expertise and knowledge to focus solely on this initiative so that firms comply with the breakpoint regulation. By addressing the issue now, it prevents any potential regulatory fines and/or investor compensation in the future," continued Mr. Hutwagner.