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Thursday, January 30, 2003

ICI Works on Breakpoints

by: Sean Hanna, Editor in Chief

Pressure from regulators and Congress is causing the Investment Company Institute to explore whether the NSCC's Fund/SERV platform could be adapted to ease the tracking of commission breakpoints. The ICI also penned a letter to Robert Glauber, chairman and chief executive officer of the NASD, to ensure that the NASD is aware of Fund/SERV's capabilities.

The letter was at least in part a response to concerns that Fund/SERV may somehow be contributing to the problem.

The ICI is also providing members to a task force into the issue being created by the Securities Industry Association (SIA). The NSCC will also have members on the task force. The task force is reportedly mulling over a number of possible ways to fix the problem, including an educational effort aimed at brokers. It could also target back-office personnel for educational efforts and even try to raise individual investors' awareness of the issue.

Still, the solution according to some observers will have to lie with the brokers as they are most familiar with each client's situation. The complexity of tracking ownership of accounts and the identity of shareholders is likely beyond a pure technological fix.

Yet, even relying on the broker may not work in all cases in the end, says one industry consultant. "It is really in nobody's interest to fix the problem," he said, noting that the extra commissions are found money for the fund firm. "You have to rely on the broker really putting the interests of the client first, that may not always happen."

Ultimately, this may be a no win issue for the fund industry.  

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