Breakpoints & Letter of Intent
Reduced sales charges on larger Class A purchases.
What is Breakpoints & Letter of Intent?
Front-end sales charges drop at set dollar thresholds. A letter of intent lets an investor get the breakpoint price by committing to reach the threshold within 13 months, and may be backdated up to 90 days. Rights of accumulation count existing holdings toward future breakpoints. Recommending a purchase just below a breakpoint is breakpoint selling, a prohibited practice.
Breakpoints & Letter of Intent: a worked example
Advising $48,000 when $50,000 would cut the sales charge, without disclosing it, is breakpoint selling.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.