April 7, 1989
TO: BOARD OF GOVERNORS NO. 23-89
SEC RULES MEMBERS NO. 20-89
12b-1 AD HOC COMMITTEE
RE: NASD NOTICE REGARDING MISUSE OF NO-LOAD TERMINOLOGY
__________________________________________________________
The attached Notice to NASD members states that the NASD
has received a number of complaints from investors regarding the
misuse of no-load terminology by NASD registered representatives
selling mutual funds with CDSLs. According to the Notice, to say
or imply that a mutual fund with a CDSL is a no-load fund is a
violation of Article III, Section I of the NASD Rules of Fair
Practice that is not alleviated by the fund's CDSL prospectus
disclosure. Moreover, NASD members and their registered
representatives are affirmatively obligated to "ensure that
prospective investors understand the nature of various charges
made by mutual funds to defray sales and promotional expenses,
whether they are deducted from an investor's purchase payment,
charged on redemption, or levied against the net assets of the
fund."
We will keep you informed of developments.
Catherine L. Heron
Deputy General Counsel
Attachment