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client sells $49,000 of various stocks and wishes to use the proceeds to buy a mutual fund that has breakpoints at $10,000 intervals. Which statement is TRUE?


A. The customer must sign a letter of intent to reach the $50,000 breakpoint
B. The customer should be informed that investing an additional $1,000 will provide the benefit of a breakpoint
C. The customer should be informed that the sales charge earned by the representative will be lower if the breakpoint is reached
D. No additional disclosures are required to be made to the customer

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Answer:

B. The customer should be informed that investing an additional $1,000 will provide the benefit of a breakpoint

Explanation:

In the transaction above some information should be disclosed and terms stated clearly so that both parties are satisfied.

For example violations must be avoided because if a customer is "close" to a breakpoint the customer must be prompted/aware that putting in the additional funds to reach that level had consequences which may/will result in a lower sales charge.

If a disclosure of this kind is not made, this registered representative however is said to have committed a violation known as a "breakpoint sale."

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