Mutual Fund Switching
Switching is the selling or redeeming of one mutual fund with a sales charge to buy another mutual fund with a sales charge. Recommended switches may not be based on the compensation to be received by as a result of affecting the switch. As for all recommendations, there must be a reasonable basis for believing the switch is suitable for the client.
The client may incur multiple sales charges by changing from one fund to another or may be subject to an extended holding period, as well as possible tax consequences because of the switch. The concern is whether the switch is justified and whether the client understands the consequences of the switch.
Switches between mutual funds that result in potential additional sales charges for the client (whether front-end or back-end load) require that a letter be obtained from the client acknowledging an understanding of the consequences of the switch.
A copy of IPI’s Mutual Fund Switch Letter may be found at the link below. When applicable, please have your clients complete the Switch Letter and send the completed letter to the Operations Department at email@example.com. The Switch Letter will be added to Laser App by the end of this week.
MF Switch Letter can be accessed at: https://ipi.egnyte.com/h-s/20140428/qwRBcvjtZV