Broker Dealer: MUTUAL FUND SWITCH & FORM

Background

 A mutual fund switch is the sale and subsequent purchase of a mutual fund within a specified time period. Generally speaking, mutual funds are designed as long-term investments. Short-term, in-and-out trading, or switching, between families of funds (i.e., many funds under a single management company) that result, or could result, in additional commission charges or that could establish new required

holding periods is strictly prohibited, both under this firm’s internal policies and under regulatory standards.

Procedure

 Whereas switching is unsuitable for most investors, under certain circumstances, a switch may be reasonable and justifiable. A designated principal will monitor switching by reviewing the transaction exceptions. Flagged transactions will be reviewed and actioned by a notation attached to the trade evidencing approval or further investigation.

In the event a mutual fund switch has been identified, the principal will retrieve the Mutual Fund Switch Letter to confirm the details of the transaction and complete further investigation.  Representatives are required to complete a Mutual Fund Switch Letter and review the details of the transaction with the client prior to the execution of the trade.  This form must be reviewed with the client and subsequently initialed and signed by the purchaser.  All Letters must be submitted for review and approval by the principal.

When a trade is flagged in the blotter, the principal will confirm the details of the switch outlined in the form and compare it to the flagged transaction.