Magazine article American Banker

Classes of Shares Proposed to Make Sales Charges Clear

Magazine article American Banker

Classes of Shares Proposed to Make Sales Charges Clear

Article excerpt

WASHINGTON -- Seeking to stem customer confusion, the mutual fund industry is promoting uniform terminology for sales charges.

The effort, which comes amid a proliferation of new types of sales charges, was unveiled here last week at the annual convention of the Investment Company Institute. Many executives at the .conference said they were grapping with what types of fees to charge and what to call them.

Under the institute's terminology, "A shares" will refer to classes of funds with traditional, upfront loads. Classes with back-end loads - sales fees that are paid at redemption - will be called B shares. Shares with level loads, or fees that are paid annually, will be called C shares. And D shares will cover variations on level loads.

Effort to Educate

"The industry was concerned that without a uniform standard, the growing number of classes and the diversity of class designations could lead to confusion and hamper communications among shareholders, mutual funds, brokers, financial planners, and others," said Matthew P. Fink, president of the Washington-based trade group.

The effort comes as the fund industry is broadening its efforts to educate customers and thereby head off regulatory and legal problems. With mutual fund ownership becoming widespread among individuals, many experts worry that the investor base is less knowledgeable than in the past.

The growing number of mutual fund shares has clearly been a source of confusiond Focus groups have found that customers often do not understand the word "load," much less share designations. …

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