Packaged Securities - Compliance
This is an important topic because investment companies are considered the instrument of choice for the least sophisticated, and therefore most vulnerable, investors. Investment company distributions must comply with far more oversight than those of any other form of security.
- Neither you as a registered representative nor your firm can accept any special gift, prize or any other consideration (beyond a standard 7% sales charge and a free lunch) that might give you the incentive to sell the funds of one mutual fund over another.
- Further, your firm cannot buy shares of a mutual fund on its own account in the expectation that the share price will rise. Mutual fund shares can only be purchased to fill an immediate order from a client.
- There is another restriction on your activities relative to how you sell mutual fund shares: the fund sets the share price. You cannot take a smaller commission, discount the selling price, and take market share away from a competitor. That sort of race-to-the-bottom is frowned upon by the SEC.
The following table summarizes the differences among closed-end funds, mutual funds, UITs and hedge funds:
|IPO||Exchange-traded||SEC-regulated||Price setter||Redeemable||Investment Advisor|
|Hedge||Yes or no||No||No||NAV||Yes||No|
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Learn about the regulatory exams needed to become a limited or registered representative and the main differences between ...